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Early-Stage Funding (ESF): Bridging the Gap in Litigation Finance

By Drew Hathaway |
March 25, 2025

Early-Stage Funding (ESF): Bridging the Gap in Litigation Finance

The following was contributed by Drew Hathaway, Founding Partner of Ignitis

Litigation funding has become a powerful tool for leveling the playing field in legal disputes, particularly in large-scale collective redress and mass litigation. However, traditional litigation funding models generally focus on established claims, leaving many meritorious cases stranded without the resources to move forward. ESF changes that dynamic, ensuring that strong claims don’t fail due to a lack of early investment.

What is Early-Stage Funding (ESF)?

ESF is a litigation seed funding model designed to provide capital before a case is mature enough for traditional funders. Unlike standard litigation finance, which typically invests after a case has been filed and is well-developed, ESF supports cases at their most critical early phase—covering investigation, legal groundwork, expert reports, and strategic planning.

For many high-stakes claims this early-stage investment is the difference between a case moving forward or being abandoned due to financial constraints.

How Can ESF Be Used?

ESF can be used in various ways. Some examples are:

  • Case Investigation & Viability Assessments: Financing expert reports, forensic analysis, and economic modeling to strengthen claims.
  • Initial Legal Work: Supporting law firms in preparing legal arguments, securing lead claimants, and initiating regulatory engagement.
  • Claimant Outreach & Bookbuilding: Funding the early-stage efforts to build a robust claimant pool in opt-in and opt-out actions.
  • Litigation Structuring & Strategy: Ensuring that the case is structured in a way that will later attract traditional (Round B) litigation funders.

Who Benefits from ESF?

ESF benefits injured parties, law firms, and traditional litigation funders in the following ways:

Claimants: Claimants generally do not have the means to finance their own litigation. For individuals or businesses harmed by corporate misconduct, access to ESF means:

  • Non-recourse capital to get the claim off the ground (meaning the ESF only needs to be paid back if the case is fully funded). 
  • The case moves forward faster, without waiting for full-scale funding.
  • Access to top-tier legal representation capable of success against well-resourced defendants.
  • The claims are properly developed and strategically executed, increasing their chances of success.

Law Firms: Law firms working on large-scale litigation often struggle with taking on the full risk and high costs of early-stage case development. This stage generally takes significant work, bookended with long timelines to securing Round B funding before capital begins to be deployed. For law firms, access to ESF means:

  • They have immediate access to capital to help with law firm cash flows.
  • They no longer must take on full risk for their time and upfront resources needed to secure funding.
  • They can focus their attention on developing the best legal arguments possible rather than worrying about their up-front time commitment.
  • They have a better developed case to present to Round B funders, making it more efficient to secure full funding.

Round B Funders (Traditional Litigation Funders): Frequently Round B Funders are presented with cases that they believe are simply too early for investment. Traditional litigation funders benefit from ESF because:

  • They receive well-developed cases that have already passed viability assessments.
  • They have immediate access to expert reports and legal opinions to better analyze the case and risks.
  • The risk of investment is reduced, since much of the groundwork has been completed and expert opinions are available.
  • Their duration risk is significantly reduced because ESF has been deployed to jump start the case and litigation is ready to commence. 

Conclusion

As litigation finance evolves, ESF is emerging as an essential tool for claimants, law firms and funders alike. By enabling early-stage legal work and de-risking high-potential claims, ESF ensures that justice is not delayed or denied due to financial constraints.

If you are exploring funding options for an early-stage case, ESF could be the solution to unlocking its full potential. 

About the Author

Drew Hathaway is a Founding Partner of Ignitis, where he leads case development, business strategy, and litigation funding initiatives. A U.S.-trained class action lawyer, Drew brings nearly two decades of experience navigating complex, high-stakes disputes and has built a reputation for advancing impactful litigation across borders.

After beginning his career defending medical malpractice cases, Drew transitioned to the plaintiff side in 2016, where he later became a key figure in the growth of international collective redress. He played a central role in launching and scaling European collective actions, helping to secure and deploy over €100 million in funding for cases aimed at holding multinational corporations accountable. Drew has helped millions of Europeans gain access to justice.

Drew’s expertise spans the full lifecycle of cross-border collective litigation—from claim foundation setup and funding structures to jurisdictional strategy, cost and tax modeling, and claims management. His comparative knowledge of U.S. and European systems allows him to operate effectively at the intersection of law and finance, where he regularly collaborates with leading law firms, economists, litigation funders, and academic experts.

He is a frequent speaker on international collective redress and litigation finance and is deeply committed to expanding access to justice for individuals and consumers harmed by systemic corporate misconduct.

He earned his B.A. from the University of North Carolina at Chapel Hill and his J.D. from Campbell University School of Law, where he was a National Moot Court Team member, Order of Old Kivett inductee, and editor of the Campbell Law Observer.

Drew is admitted to practice law in North Carolina, multiple U.S. federal and appellate courts, and in England and Wales.

About the author

Drew Hathaway

Drew Hathaway

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Commercial Deals

Slater and Gordon Secures Renewed £30M Financing with Harbour

By John Freund |

Slater and Gordon has announced the renewal of its committed financing facility with Harbour, securing an enhanced £30 million loan agreement that strengthens the firm’s financial position and supports its ongoing strategic plans.

According to Slater and Gordon, the facility replaces the previous arrangement and will run for at least three years, underscoring the depth of the relationship between the firm and Harbour, a long-standing provider of capital to law firms.

The renewed financing follows a £30 million equity raise earlier in 2025 and is intended to provide financing certainty as Slater and Gordon continues to invest across its core practice areas and enhance its client service offering. Chief executive Nils Stoesser highlighted the progress the business has made in recent years and said the renewed facility provides confidence as the firm pursues its longer-term strategic priorities.

Ellora MacPherson, Harbour’s managing director and chief investment officer, described the commitment as the next stage in a constructive and established partnership. She noted Harbour’s support for Slater and Gordon’s ambitions, particularly around improving service delivery and outcomes for clients.

Over the past two years, Slater and Gordon has focused on strengthening its family law, employment, and personal injury practices, while also expanding its capacity to handle large-scale group actions. The firm has also continued to invest in technology and operational improvements aimed at improving the overall client experience.

Commercial

Litigation Finance Faces Regulatory, MSO, and Insurance Crossroads in 2026

By John Freund |

The litigation finance industry, now estimated at roughly $16.1 billion, is heading into 2026 amid growing uncertainty over regulation, capital structures, and its relationship with adjacent industries. After several years of rapid growth and heightened scrutiny, market participants are increasingly focused on how these pressures may reshape the sector.

Bloomberg Law identifies four central questions likely to define the industry’s near-term future. One of the most closely watched issues is whether federal regulation will finally materialize in a meaningful way. Legislative proposals have ranged from restricting foreign sovereign capital in U.S. litigation to taxing litigation finance returns. While several initiatives surfaced in 2025, political gridlock and election year dynamics raise doubts about whether comprehensive federal action will advance in the near term, leaving the industry operating within a patchwork of existing rules.

Another major development is the expansion of alternative investment structures, particularly the growing use of management services organizations. MSOs allow third party investors to own or finance non legal aspects of law firm operations, offering a potential pathway for deeper capital integration without directly violating attorney ownership rules. Interest in these models has increased among both litigation funders and large law firms, signaling a broader shift in how legal services may be financed and managed.

The industry is also watching the outcome of several high profile disputes that could have outsized implications for funders. Long running, multibillion dollar cases involving sovereign defendants continue to test assumptions about risk, duration, and appellate exposure in funded matters.

Finally, tensions with the insurance industry remain unresolved. Insurers have intensified efforts to link litigation funding to rising claim costs and are exploring policy mechanisms that would require disclosure of third party funding arrangements.

Taken together, these dynamics suggest that 2026 could be a defining year for litigation finance, as evolving regulation, new capital models, and external pushback shape the industry’s next phase of development.

Commercial Regulatory Issues

Liability Insurers Push Disclosure Requirements Targeting Litigation Funding

By John Freund |

Commercial liability insurers are escalating their long-running dispute with the litigation funding industry by introducing policy language that could require insured companies to disclose third-party funding arrangements. The move reflects mounting concern among insurers that litigation finance is contributing to rising claim costs and reshaping litigation dynamics in ways carriers struggle to underwrite or control.

An article in Bloomberg Law reports that the Insurance Services Office, a Verisk Analytics unit that develops standard insurance policy language, has drafted an optional provision that would compel policyholders to reveal whether litigation funders or law firms with a financial stake are backing claims against insured defendants. While adoption of the provision would be voluntary, insurers could begin incorporating it into commercial liability policies as early as 2026.

The proposed disclosure requirement is part of a broader push by insurers to gain greater visibility into litigation funding arrangements, which they argue can encourage more aggressive claims strategies and higher settlement demands, particularly in mass tort and complex commercial litigation. Insurers have increasingly linked these trends to what they describe as social inflation, a term used to capture rising jury awards and litigation costs that outpace economic inflation.

For policyholders, the new language could introduce additional compliance obligations and strategic considerations. Companies that rely on litigation funding, whether directly or through counterparties, may be forced to weigh the benefits of financing against potential coverage implications.

Litigation funders and law firms are watching developments closely. Funding agreements are typically treated as confidential, and mandatory disclosure to insurers could raise concerns about privilege, work product protections, and competitive sensitivity. At the same time, insurers have been criticized for opposing litigation finance while also exploring their own litigation-related investment products, highlighting tensions within the market.

If widely adopted, insurer-driven disclosure requirements could represent a meaningful shift in how litigation funding intersects with insurance. The development underscores the growing influence of insurers in shaping transparency expectations and suggests that litigation funders may increasingly find themselves drawn into coverage debates that extend well beyond the courtroom.