Trending Now
  • An LFJ Conversation with Jason Levine, Partner at Foley & Lardner LLP
  • Joint Liability Proposals Threaten Consumer Legal Funding
Commercial Special Features

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

Commercial

View All
Commercial Legal Innovation

LSC Showcases Access-to-Justice Tech at San Antonio ITC

By John Freund |

The Legal Services Corporation (LSC) brought the access-to-justice conversation squarely into the technology arena with its 26th annual Innovations in Technology Conference (ITC), held this week in San Antonio. Drawing nearly 750 registered attendees from across the legal, business, and technology communities, the conference highlighted how thoughtfully deployed technology can expand civil legal assistance for low-income Americans while maintaining ethical and practical guardrails.

Legal Services Corporation reports that this year’s ITC convened attorneys, legal technologists, court staff, pro bono leaders, academics, and students at the Grand Hyatt San Antonio River Walk for three days of programming focused on the future of legal services delivery. The conference featured 56 panels—16 streamed online and freely accessible—covering topics ranging from artificial intelligence and cybersecurity to court technology, data-driven decision-making, and pro bono innovation.

LSC President Ron Flagg framed the event as a collaborative effort to ensure technology serves people rather than replaces human judgment. Emphasizing that technology is “not the answer by itself,” Flagg underscored its role as a critical tool when grounded in the real needs of communities seeking civil legal help. The conference opened with a keynote from journalist and author David Pogue, setting the tone for candid discussions about both the promise and limitations of emerging technologies.

A notable evolution this year was the introduction of five structured programming tracks—AI beginner, AI advanced, IT operations, client intake, and self-help tools—allowing attendees to tailor their experience based on technical familiarity and organizational needs. The event concluded with hands-on workshops addressing cybersecurity incident response, improving AI accuracy and reliability, change management for staff resilience, and user experience evaluation in legal tech.

Beyond the conference itself, ITC reinforced LSC’s broader leadership in access-to-justice technology, including its Technology Initiative Grants, AI Peer Learning Lab, and its recent report, The Next Frontier: Harnessing Technology to Close the Justice Gap. Senior program officer Jane Ribadeneyra emphasized the dual focus on informed leadership decisions and practical tools that directly support frontline legal services staff handling matters like eviction, domestic violence, and disaster recovery.

For the litigation funding and legal finance community, ITC’s themes highlight a growing intersection between technology, access to justice, and capital deployment—raising questions about how funders may increasingly support tech-enabled legal service models alongside traditional case funding.

Commercial

Litigation Financiers Organize on Capitol Hill

By John Freund |

The litigation finance industry is mobilizing its defenses after nearly facing extinction through federal legislation last year. In response to Senator Thom Tillis's surprise attempt to impose a 41% tax on litigation finance profits, two attorneys have launched the American Civil Accountability Alliance—a lobbying group dedicated to fighting back against efforts to restrict third-party funding of lawsuits.

As reported in Bloomberg Law, co-founder Erick Robinson, a Houston patent lawyer, described the industry's collective shock when the Tillis measure came within striking distance of passing as part of a major tax and spending package. The proposal ultimately failed, but the close call exposed the $16 billion industry's vulnerability to legislative ambush tactics. Robinson noted that the measure appeared with only five weeks before the final vote, giving stakeholders little time to respond before the Senate parliamentarian ultimately removed it on procedural grounds.

The new alliance represents a shift toward grassroots advocacy, focusing on bringing forward voices of individuals and small parties whose cases would have been impossible without funding. Robinson emphasized that state-level legislation now poses the greater threat, as these bills receive less media scrutiny than federal proposals while establishing precedents that can spread rapidly across jurisdictions.

The group is still forming its board and hiring lobbyists, but its founders are clear about their mission: ensuring that litigation finance isn't quietly regulated out of existence through misleading rhetoric about foreign influence or frivolous litigation—claims Robinson dismisses as disconnected from how funders actually evaluate cases for investment.

Commercial

ISO’s ‘Litigation Funding Mutual Disclosure’ May Be Unenforceable

By John Freund |

The insurance industry has introduced a new policy condition entitled "Litigation Funding Mutual Disclosure" (ISO Form CG 99 11 01 26) that may be included in liability policies starting this month. The condition allows either party to demand mutual disclosure of third-party litigation funding agreements when disputes arise over whether a claim or suit is covered by the policy. However, the condition faces significant enforceability challenges that make it largely unworkable in practice.

As reported in Omni Bridgeway, the condition is unenforceable for several key reasons. First, when an insurer denies coverage and the policyholder commences coverage litigation, the denial likely relieves the policyholder of compliance with policy conditions. Courts typically hold that insurers must demonstrate actual and substantial prejudice from a policyholder's failure to perform a condition, which would be difficult to establish when coverage has already been denied.

Additionally, the condition's requirement for policyholders to disclose funding agreements would force them to breach confidentiality provisions in those agreements, amounting to intentional interference with contractual relations. The condition is also overly broad, extending to funding agreements between attorneys and funders where the insurer has no privity. Most problematically, the "mutual" disclosure requirement lacks true mutuality since insurers rarely use litigation funding except for subrogation claims, creating a one-sided obligation that borders on bad faith.

The condition appears designed to give insurers a litigation advantage by accessing policyholders' private financial information, despite overwhelming judicial precedent that litigation finance is rarely relevant to case claims and defenses. Policyholders should reject this provision during policy renewals whenever possible.