Mighty

 

Josh Schwadron's original concept for his litigation financing startup Mighty was as a crowd-sourced litigation financing marketplace. The company invited investors with legal expertise to invest directly into plaintiff litigation, something Schwadron believed would ultimately help personal injury plaintiffs get better access to justice. “We thought that the best way of making the space move more quickly into mainstream was to create a marketplace and to go direct to consumer,” he said.

Mighty's bidding-based structure was extremely popular among software investors at the time, with many hoping to replicate the success of companies such as Airbnb. Indeed, Mighty picked up a $5.25 million Series A investment back in 2015 from a few different New York-based venture capital firms.

In the first years of Mighty's operation, however, Schwadron saw an even greater market opportunity in the litigation finance space: litigation financiers themselves.

“When we were operating our marketplace, we built really robust software, technology and automation,” Schwadron said. Competing litigation finance companies repeatedly expressed interest in licensing out the in-house technology Mighty had built to manage its investments.

Mighty decided to abandon its original consumer-facing structure in favor of serving this new market. “We decided that was kind of a better move for us, a better move for the industry, and a better move for plaintiffs, because the more people inject technology and services and automation into the ecosystem, the ultimate beneficiaries are the end customer, which in this case is plaintiffs,” Schwadron said.

The company this week announced it had raised $114 million for growth and development.  Of that fund, $9 million comes from equity funding led by Tribeca Venture Partners and IA Ventures, which will be used to support Mighty's technology development work. The remaining $105 million, drawn from “major institutional investors,” has been earmarked for Mighty Capital, the company's new investment fund for litigation finance companies.

“One of the things we understood deeply from this industry from being in it, in addition to the operational costs of running these businesses, is that capital markets have not fully understood this asset class yet, and is, in our opinion, charging too much to these companies, who are in turn giving capital to plaintiffs,” Schwadron explained.

“We saw an opportunity, being the domain expert, to raise money to put into these companies,” Schwadron said of Mighty Capital. The company will offer two capital sourcing products: Mighty Financing, a set of loan facility options, and Mighty Cash Flow, in which Mighty purchases some or all litigation financiers in exchange for upfront capital.

In addition, the company will continue to develop out its software offerings. The company has developed a series of tools to help litigation financiers in different states manage different state-level regulatory concerns, and it plans to continue developing out software that can help financiers support plaintiffs with living and medical expenses through litigation.

Schwadron said the company's shift toward litigation financiers was enabled by its own experience trying to navigate the world of litigation financing. “We were able to do this because we knew the trials and tribulations, no pun intended, firsthand,” he said.

Mighty's pivot away from a consumer marketplace falls in line with the broader legal technology community's difficulty maintaining consumer-facing marketplace startups, in large part due to state-level rules against improper fee splitting. Bar associations in states such as New Jersey and New York have pushed back against legal service marketplaces such as Avvo, RocketLawyer and LegalZoom, while a string of smaller legal marketplace platforms with names such as Shpoonkle and Lawtendr came and went in the space of just a few years.

Despite the pivot, however, Schwadron maintains that Mighty's goals as a company have not changed. “Our ultimate goal is to help this industry become ubiquitous, because we believe that financing that is easy, efficient and inexpensive will dramatically improve the lives of personal injury plaintiffs,” he said.