AxiaFunder

Idea

Introduction

Once the preserve of hedge funds and other large institutions, private investors can now share in the attractive potential returns offered by litigation finance.

To the best of our knowledge, AxiaFunder is the UK’s first commercial litigation funding platform. The platform launched in January last year and aims to connect eligible investors (typically institutions, high-net-worth or sophisticated retail investors) with claimants seeking funding.

Investors receive a return on their capital if the case wins and lose some or all of their capital if the case loses.

AxiaFunder brings together a mix of finance, litigation funding and startup expertise. AxiaFunder's head of case assessment, Michael Lent has significant experience in commercial litigation. Michael was first registered as a solicitor in 1978.

By matching pre-vetted litigation cases with funders, AxiaFunder is able to create new investment opportunities while offering claimants a viable solution to their funding requirements.

Intended impact

The UK litigation funding market is growing, yet we believe that the market for smaller claims (requiring <£1m in funding) remains relatively underserved.

Enter AxiaFunder - the litigation crowdfunding platform aimed at legal claims requiring funding from £10,000 up to £1 million.

Small businesses and individuals may find themselves confronted with prohibitive legal costs when defending their interests. AxiaFunder aims to help "level the playing field".

At AxiaFunder we take a rigorous approach to assessing potential deals: amongst a number of important criteria, cases must have strong legal merits, attractive economics (damages to cost-to-litigate ratio of typically at least 5x), and a high chance of enforceability of any judgement.

For investors, litigation funding offers a ready way to diversify exposure. Legal claims are uncorrelated with traditional asset classes, such as equities, bonds, property or commodities, and instead have their own unique risk/return profile.

Substantial accomplishments to date

- To the best of our knowledge, we have developed the first for-profit commercial litigation funding platform in the UK accessible by retail investors.
- Appointed Representative of an FCA regulated Firm, ShareIn; partnered with an FCA regulated Fund Manager, Enterprise Investment Partners.
- Set up a flexible investment structure that enables cases to be structured as either equity or bond investments (IFISA eligible).
- Launched in January 2019 with the first case fully funded within 7 days and the third in 7 hours; 5 cases funded to date.
- Attracted over 355 registered investors so far with very limited marketing budget, including several institutions
- Funded first case requiring over £500,000 in December 2019
- Featured in a number of important publications including the Financial Times, Times and City AM
- Won award as Best Commercial Litigation Crowdfunding Platform 2019 by Wealth & Finance.
- Secured a pre-funding partnership providing increased certainty to claimants.

Monetisation strategy

AxiaFunder generates revenues by firstly charging claimants an Upfront Fee typically equal to 10% of the funds we raise for their case on our funding platform.

Secondly, on a successful outcome AxiaFunder receives a Performance Fee of a further 20% of the return due to the case funders.

Take the hypothetical example of a legal claim requiring £100,000 under those terms. In such case Axia could receive 10% of £100,000 or £10,000 in platform revenues at the onset of the case.

Assume then that this hypothetical dispute reaches a successful resolution after a period of 24 months with the claimant paying a fee of 100% pa on the invested capital (competitive with typical benchmarks for litigation funding). The claimant would have paid £200,000 on their invested capital, of which £40,000 would be payable to Axia as a Performance Fee, with the balance paid to case investors.

So, in this hypothetical example AxiaFunder could expect to generate total revenues of £50,000 from a single successful £100,000 claim.

Use of proceeds

AxiaFunder plans to use the proceeds of this funding round in three major areas: (i) making key hires particularly to strengthen its case origination and assessment capability; (ii) further development of its technology platform including the use of big data/ smart data learning techniques for screening claims; and iii) in its marketing efforts to build the AxiaFunder brand and grow its investor base.

Breaking down this spending into the key categories:

- Key staff cost 66%
- Marketing 5%
- Compliance and Legal advice 21%
- Technology 9%