YC - Josh Flashcards
(38 cards)
Someone just showed us an idea like this right before you guys. I don’t like it. What else do you have?
Yes, another promising area we have done a lot of research into is personal injury funding. This area operates on contingency, which means the lawyers self-fund their cases for a percentage of winnings. We’d take a moneyball like approach, identifying high promise, more junior attorneys and funding larger cases that only attorneys later in their careers are able to take on due to their accumulated wealth.
What else have you created together?
Built prototype, 🎵 a home 🎵
How much does customer acquisition cost?
ROM - We estimate CAC is $6K. $300K annual cost for Sales + Marketing, to run cases for a $10M fund, deploying $5M per year. Each customer will be requiring on average $100K in capital. So that means 50 customers a year.
What are the top things users want?
Industry research shows extremely important Trustworthy funder (95%), financial terms (75%), transparency (55-70%). This is accd to Validity Finance annual survey. Consistent with our convos
Why these benefits
From our conversations with law firms and plaintiffs, these are the benefits that they have suggested are most valuable.
Why doesn’t this exist?
Because you can be incredibly profitable in this industry without technology like this. However, as the industry matures and funding becomes more of a commodity, other players are going to realize they missed the technology boat to continue to offer competitive financing.
What’s the roadmap?
- Technical development - prototype ready and investment-ready MVP by Dec. 1.
- Sales/Marketing throughout the months ahead to have customers lined up with deals once capital is available.
- LP courting will start shortly, as of this week we have our prototype. We’d ideally want commitments in 4 to 6 months.
- Building out finance and operations required to execute deals throughout to be ready when we hit go
What do you understand that others don’t?
New technologies enable higher precision, quantitative case predictions. This can enable more affordable financing (or a new standard of what is fair)
Have you started LP process? Have you had conversations with asset managers?
We will be starting in the next couple weeks, once we have a functional prototype. We’ve had a few conversations to better understand how LPs think and how best to approach this process, and it is clear that opening conversations early will be critical.
Whats your vision for this market
More awareness and demand (only ~15% of commercial litigators have used litgation finance), increased capital entering market, lower costs of capital, securitization
Market Trends
LitFin rapidly growing. $11B AUM 2018, $22B by 2027.
Any other stat or number thats key and important
45% IRR is industry standard. And these are uncorrelated returns! 98% of respondents who have used litigation finance found it useful and said they would use it again
Six months from now, what’s going to be your biggest problem?
Finding all cases at once to begin deploying capital and the operational aspect of maintaining the portfolio
What problems and hurdles are you anticipating? How will you overcome them?
Raising LP capital + finding enough case investments. On the LP side, we’ll offer our first fund very attractive terms if necessary. On the deployment side, we will algorithmically target plaintiffs and seek portfolio deals
What is our number one biggest weakness?
Chicken and egg problem with funding and case pipeline.
How will you solve this chicken-and-egg?
We aim to finish refining our model, and then raise smaller amounts of capital to invest in cases, if we can’t raise a large fund. And if we have trouble getting funds without a track record, we’re prepared to start bankroll small cases ourself if feasible. We’re going to do this no matter how hard.
How are you going to get LPs?
We will focus on family offices, HNW individuals, and wealthy lawyers / law firms, and potentially angels. Fortunately our backgrounds have afforded us a connections across all of these categories, so we have a place to start. This will be a very high effort process, and we will likely aim to raise faster and less vs longer and more so we can start showing returns.
In what ways are you resourceful?
We’re fully bootstrapped and have scoured the web and talked with friends to find any and every way to build everything so far for free. Every tool we use, we’ve found a way to get them for free so we have more than enough personal runway prior to getting funding
What’s the biggest mistake you have made?
Trying to sell to Litigation Funders
What’s the worst thing that has happened?
Sales side was really tough at the beginning - a lot of horrible and mean lawyers.
What systems have you hacked?
We found a way to get past secretaries with consistency. Whenever we asked to speak to attorneys, they would take a message. Data was showing us that we were getting virtually no response from this avenue. Thinking through the psychology of the secretary, we realized the less calls they had come in, the less work they had, so we began telling them “no worries, we’ll call back later.”Most of the time, if the attorney is in, they will check if the attorney is available to talk and be more open to connecting us through to reduce their future incoming calls.
Would you relocate to Silicon Valley?
New York is a better fit at the moment because we are investing in NYS cases, but we are open to the relocation if the business requires it.
What about the equity split?
Equal
What’s the funniest thing that has happened to you?
It’s hard to maybe pinpoint one specific thing, but I think we’re getting to the point that we may need an excel sheet to keep track of our inside jokes
