YC - Josh

Question 1

Someone just showed us an idea like this right before you guys. I don’t like it. What else do you have?

Answer 1

Yes, another promising area we have done a lot of research into is personal injury funding. This area operates on contingency, which means the lawyers self-fund their cases for a percentage of winnings. We’d take a moneyball like approach, identifying high promise, more junior attorneys and funding larger cases that only attorneys later in their careers are able to take on due to their accumulated wealth.

Question 2

What else have you created together?

Answer 2

Built prototype, 🎵 a home 🎵

Question 3

How much does customer acquisition cost?

Answer 3

ROM - We estimate CAC is $6K. $300K annual cost for Sales + Marketing, to run cases for a $10M fund, deploying $5M per year. Each customer will be requiring on average $100K in capital. So that means 50 customers a year.

Question 4

What are the top things users want?

Answer 4

Industry research shows extremely important Trustworthy funder (95%), financial terms (75%), transparency (55-70%). This is accd to Validity Finance annual survey. Consistent with our convos

Question 5

Why these benefits

Answer 5

From our conversations with law firms and plaintiffs, these are the benefits that they have suggested are most valuable.

Question 6

Why doesn’t this exist?

Answer 6

Because you can be incredibly profitable in this industry without technology like this. However, as the industry matures and funding becomes more of a commodity, other players are going to realize they missed the technology boat to continue to offer competitive financing.

Question 7

What’s the roadmap?

Answer 7

• Technical development - prototype ready and investment-ready MVP by Dec. 1.
• Sales/Marketing throughout the months ahead to have customers lined up with deals once capital is available.
• LP courting will start shortly, as of this week we have our prototype. We’d ideally want commitments in 4 to 6 months.
• Building out finance and operations required to execute deals throughout to be ready when we hit go

Question 8

What do you understand that others don’t?

Answer 8

New technologies enable higher precision, quantitative case predictions. This can enable more affordable financing (or a new standard of what is fair)

Question 9

Have you started LP process? Have you had conversations with asset managers?

Answer 9

We will be starting in the next couple weeks, once we have a functional prototype. We’ve had a few conversations to better understand how LPs think and how best to approach this process, and it is clear that opening conversations early will be critical.

Question 10

Whats your vision for this market

Answer 10

More awareness and demand (only ~15% of commercial litigators have used litgation finance), increased capital entering market, lower costs of capital, securitization

Question 11

Market Trends

Answer 11

LitFin rapidly growing. $11B AUM 2018, $22B by 2027.

Question 12

Any other stat or number thats key and important

Answer 12

45% IRR is industry standard. And these are uncorrelated returns! 98% of respondents who have used litigation finance found it useful and said they would use it again

Question 13

Six months from now, what’s going to be your biggest problem?

Answer 13

Finding all cases at once to begin deploying capital and the operational aspect of maintaining the portfolio

Question 14

What problems and hurdles are you anticipating? How will you overcome them?

Answer 14

Raising LP capital + finding enough case investments. On the LP side, we’ll offer our first fund very attractive terms if necessary. On the deployment side, we will algorithmically target plaintiffs and seek portfolio deals

Question 15

What is our number one biggest weakness?

Answer 15

Chicken and egg problem with funding and case pipeline.

Question 16

How will you solve this chicken-and-egg?

Answer 16

We aim to finish refining our model, and then raise smaller amounts of capital to invest in cases, if we can’t raise a large fund. And if we have trouble getting funds without a track record, we’re prepared to start bankroll small cases ourself if feasible. We’re going to do this no matter how hard.

Question 17

How are you going to get LPs?

Answer 17

We will focus on family offices, HNW individuals, and wealthy lawyers / law firms, and potentially angels. Fortunately our backgrounds have afforded us a connections across all of these categories, so we have a place to start. This will be a very high effort process, and we will likely aim to raise faster and less vs longer and more so we can start showing returns.

Question 18

In what ways are you resourceful?

Answer 18

We’re fully bootstrapped and have scoured the web and talked with friends to find any and every way to build everything so far for free. Every tool we use, we’ve found a way to get them for free so we have more than enough personal runway prior to getting funding

Question 19

What’s the biggest mistake you have made?

Answer 19

Trying to sell to Litigation Funders

Question 20

What’s the worst thing that has happened?

Answer 20

Sales side was really tough at the beginning - a lot of horrible and mean lawyers.

Question 21

What systems have you hacked?

Answer 21

We found a way to get past secretaries with consistency. Whenever we asked to speak to attorneys, they would take a message. Data was showing us that we were getting virtually no response from this avenue. Thinking through the psychology of the secretary, we realized the less calls they had come in, the less work they had, so we began telling them “no worries, we’ll call back later.”Most of the time, if the attorney is in, they will check if the attorney is available to talk and be more open to connecting us through to reduce their future incoming calls.

Question 22

Would you relocate to Silicon Valley?

Answer 22

New York is a better fit at the moment because we are investing in NYS cases, but we are open to the relocation if the business requires it.

Question 23

What about the equity split?

Answer 23

Equal

Question 24

What’s the funniest thing that has happened to you?

Answer 24

It’s hard to maybe pinpoint one specific thing, but I think we’re getting to the point that we may need an excel sheet to keep track of our inside jokes

Question 25

Have you raised funding?

Answer 25

No

Question 26

How long can you go before funding?

Answer 26

We have long personal runways, at least a year.

Question 27

What will you do if we don’t fund you?

Answer 27

We’re going to keep pushing hard and build this company.

Question 28

What is your burn rate

Answer 28

Our burn rate is neglible. Actual cash outflow is website hosting ~$20, we’ve gotten a number of perks by being scrappy for everything else and via ODF.

Question 29

What are your unit economics?

Answer 29

We can estimate LTV for our current price range to be around $300K. CAC is $6K. LTV:CAC of 50. In the future we’d expect our LTV to spike up.

Question 30

What keeps you up at night?

Answer 30

Even though we are betting on much smaller cases, we are worried that the bets are too chunky and a few poorly made investments would derail our returns.

Question 31

Why your business NOW?

Answer 31

Business side, economic uncertainty is driving increases in demand for the asset class, largest player just went public in the US, so increased awareness ahead. NLP keeps breaking ground in understanding text

Question 32

How much money could you make per year?

Answer 32

With a 2 and 20 model, a billion dollar fund would be approx $100M excluding reinvest, but in theory when things go well, we can have more aggressive terms

Question 33

What have you built?

Answer 33

I built a tool for companies that allow them to manage 100Ks of product lines internally and predict viability of new products by applying a blend of qualitative factors and financial forecasting

Question 34

How much money do you want to raise?

Answer 34

$2-2.5M

Question 35

What would you do with you money raised?

Answer 35

For 2 yr runway, pay ourselves 50-60K plus benefits, 2 engineers, 2 sales, 1 top trial attorney plus extra cash

Question 36

Tell me about your business operations background

Answer 36

After Wharton, I spent five years in strategy consulting. I worked on behalf of small and large company executive teams doing process improvement, financial modeling and forecasting, growth and go-to-market strategy, and organization design.

Question 37

How will your background be critical

Answer 37

As we scale our case portfolio into the thousands, we will need extremely tight operations for case management. I have the expertise to build out this function

Question 38

Good ops example?

Answer 38

I built and applied a test-and-learn framework that led to the restructuring of customer ops of a F500 company