Much of the litigation finance industry is focused on large commercial litigation (e.g., trade secrets, patent infringement, mass tort, etc.), or on small personal injury claims. The reason for this split across the industry is largely related to economic efficiency.

Personal injury cases cost only a few thousand dollars to fund in many cases and can be largely evaluated with simple quantitative metrics in the span of a few minutes. Large commercial cases are typically evaluated by experienced professional attorneys – but the cost of that in-depth analysis is most economical when it involves very large cases.

The current reality in the market leaves the vast majority of business litigation unserved. That segment – the middle market, if you will – has a greater need for litigation finance, yet no one to fund such matters. In fact, there are only a handful of firms serving the middle-market cases where damages range from $500,000 to a few million dollars.

There are some firms serving this segment of the market, but not many. The one I am most familiar with is TownCenter Partners, but occasionally larger funders will operate in the space as well. As a result, middle-market firms that I have worked with often turn to one-off funders who dabble in the the litigation finance space.

The arguments advanced by many funders against operating in the middle market typically come in one of two flavors: (1) it’s too hard to find cases in the middle market, and (2) it’s not economical to fund cases in the middle market.