Litigation funding firm Validity Finance has raised $100 million from its private equity backer and other large investors as the coronavirus pandemic boosts opportunities for litigation investors.
Validity is at least the fourth major litigation finance firm to raise capital this year, bringing new money in the market in 2020 to more than $900 million. Investors have poured money into companies that invest in litigation in exchange for a share of the returns, and a survey last year said U.S. litigation funders had access to nearly $10 billion in capital.
Validity, which has offices in New York, Chicago, Houston, and Tel Aviv, launched in 2018 with backing from TowerBrook Capital Partners and has committed more than $125 million. The firm is seeing a surge in demand for its capital since the onset of Covid-19, CEO Ralph Sutton said in an interview.
Since the virus broke out earlier this year, the firm has seen monthly increases in funding opportunities of 50% to 70% compared to a year ago, Sutton said. The funder closed more transactions in the second quarter this year than it did all last year, he said.
“As the track record increases for its performance, this asset area is proving more attractive than ever,” Sutton said. “Larger investors are seeing it as an alternative asset worth investing in.”
Validity expects by the end of this year to have reviewed 1,000 cases as funding opportunities since mid-2018. Sutton said it took him six years to reach that milestone at his previous litigation finance firm, which is now known as Omni Bridgeway, noting the metric as a sign of growth in the industry.
Validity also said it had hired former Fried Frank associate Jason Listhaus as its first corporate counsel, another sign of growth. Listhaus will help Validity draft contract terms more quickly by bringing the function in-house, Sutton said. In March, Validity hired two Big Law veterans to help analyze cases. The company has 15 employees who average four years of experience in litigation finance, Sutton said.
As for demand from the coronavirus, Sutton said he expects to see more insolvency and bankruptcy claims down the road. But so far, the claims have consisted of typical investment areas for funders: business disputes, fraud, international arbitration, and patent litigation.