In 2009, Burford Capital listed on London's AIM market with a simple pitch to investors: lawsuits are an asset class. Seventeen years later, the industry manages an estimated $16 billion in assets in the United States alone, with more than 200 active funders deploying $2.3 billion in new deals in 2024. The product they sell is non-recourse capital — money that is repaid only if the case wins. The skill they sell is valuation.
Litigation finance is, at its core, a pricing discipline. A funder must answer the same question a defendant asks at mediation — what is this case actually worth? — but with its own money at stake and no upside from being wrong. Their underwriting process is the most rigorous case-valuation methodology in private practice. It is worth understanding even if you never take a dollar of funding.
The Four Questions
Burford's published diligence framework is representative of the industry. Every matter goes through initial screening — is it commercial, is it in a recognized jurisdiction, is counsel competent, are the damages large enough to survive everyone's return? — and then a two-pronged deep review. Four questions dominate.
First: liability. Not "can we win," but "how many ways can we lose." Funders stress-test the legal theory against the worst plausible judge, the strongest defense, the appeal that reverses the trial win. They hire outside counsel to write the other side's brief, in effect, before committing capital.
Second: damages. This is where funders earn their fees. A damages model is built — often by economists the funder retains — that runs scenarios from the floor (nuisance value) to the ceiling (full recovery), assigning probabilities to each. The question is never the headline number. It is the probability-weighted recovery net of everything: legal fees, the funder's return, the time value of money.
Third: collectability. A $50 million judgment against an insolvent defendant is worthless, and funders learned this the expensive way. Asset investigation — bank accounts, real property, insurance coverage, corporate veils — is a standard diligence line item. The defendant's balance sheet is as much a part of the valuation as the merits.
Fourth: duration. Litigation capital is locked up for years, and the funder's return must compensate for that illiquidity. A case that resolves in 18 months prices very differently from one that runs five years through appeal. Funders model time-to-resolution explicitly, and the pricing ratchets with it.
The Pricing: 2x, 3x, and the Waterfall
Funding economics are built around a simple structure. The funder's return is typically expressed as a multiple of invested capital — 2x to 3x is the industry standard — or as a percentage of proceeds, usually 20 to 30%, with the funder taking whichever is higher. Some agreements layer both: a minimum multiple floor plus a percentage participation above it.
The math is brutal by design. Consider a funder that deploys $1 million into a case at 3x pricing. On success, it receives $3 million. On failure — and the capital is non-recourse, so failure means zero — it receives nothing. With individual-case loss rates running 30 to 40% across portfolios, the winners must carry the losers. A 3x multiple on the successes is not greed. It is the arithmetic of a portfolio that loses a third of its positions outright.
The payment waterfall is the most negotiated term in every agreement: the funder is typically repaid first — capital plus return — with the balance remitted to the claimholder. Responsible funders, including market leaders like Burford and Omni Bridgeway, will decline a case if the likely scenarios leave too little for the claimant — because a structure that prevents the client from accepting a reasonable settlement is a structure that destroys value for everyone.
What Funders Won't Touch
The rejection pile is as instructive as the portfolio. Funders routinely pass on cases with strong merits and large damages — because valuation is not just about winning. Personal injury cases are generally unfundable at the institutional level: individual damages are too small relative to diligence costs, and the economics only work in aggregated portfolios. Cases against insolvent defendants fail the collectability screen no matter how egregious the liability. Early-stage cases with undeveloped records fail the certainty screen — the variance is too wide to price.
Jurisdiction kills more deals than merits do. Funders favor common-law jurisdictions with predictable enforcement and established litigation-finance frameworks. A strong claim in a jurisdiction where judgments are difficult to enforce is, from the funder's perspective, a lottery ticket — and funders do not buy lottery tickets.
There is also the duration filter, which surprises first-time applicants. A case expected to run seven years through trial and appeal must clear a much higher return bar than one expected to settle in two. Time is the silent variable in every funding decision: it compounds the funder's required multiple, shrinks the claimant's net recovery, and increases the probability that something — a witness, a judge, a market — changes.
Why the Acceptance Rate Is Below 5%
Industry estimates put funder acceptance rates below 5% of submitted cases — some say under 3%. The vetting process for a single matter can take 60 to 90 days. Top funders employ former litigators and damages economists full-time; underwriting is the core competency, and the quality of that underwriting is the primary variable separating strong portfolio returns from capital loss.
There is a lesson in this for anyone valuing a case. Funders succeed because they are disciplined about four things most litigants are casual about: they price the downside, they verify collectability before they care about liability, they model duration as a cost, and they walk away from 95% of what they see. The last one is the real edge. Most participants in litigation fall in love with their cases. Funders are paid not to.
"A lawsuit is worth what a disciplined buyer would pay for it — and the most disciplined buyers in the business reject 95% of what they see."