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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

UK Government Signals Funding Crackdown in Claims Sector Reform

By John Freund |

The UK government has signalled a renewed regulatory focus on the claims management and litigation funding sectors, as part of a broader effort to curb what it characterises as excessive or speculative claims activity. The move forms part of a wider review of the consumer redress and claims ecosystem, with third-party funding increasingly drawn into policy discussions around cost, transparency, and accountability.

An article in Solicitor News reports that ministers are examining whether litigation funding and related financial arrangements are contributing to an imbalance in the claims market, particularly in mass claims and collective redress actions. While litigation funding has historically operated outside the scope of formal regulation in England and Wales, policymakers are now considering whether additional oversight is required to protect consumers and defendants alike. This includes potential scrutiny of funding agreements, funder returns, and the role of intermediaries operating between claimants, law firms, and capital providers.

The renewed attention comes amid political pressure to rein in what critics describe as a growing “claims culture,” with the government keen to demonstrate action ahead of future legislative reforms. Industry stakeholders have cautioned, however, that overly restrictive measures could limit access to justice, particularly in complex or high-cost litigation where claimants would otherwise be unable to pursue meritorious claims. Litigation funders have long argued that their capital plays a stabilising role by absorbing risk and enabling legal representation in cases involving significant power imbalances.

While no formal proposals have yet been published, the article suggests that funding models linked to claims management companies may face particular scrutiny, especially where aggressive marketing or fee structures are perceived to undermine consumer interests. Any regulatory changes would likely build on existing reforms affecting claims management firms and contingency-style legal services.

Case Developments Commercial

Litigation Lending Funds Woolworths Shareholder Class Action

By John Freund |

Litigation Lending Services Limited has agreed to fund a large-scale shareholder class action against Woolworths Group Ltd, adding another high-profile Australian securities claim to the growing docket of funded investor litigation. The proceeding has been filed in the Federal Court of Australia by Dutton Law and focuses on Woolworths’ alleged failure to properly disclose the financial impact of widespread employee underpayments over a lengthy period.

Litigation Lending's website notes that the claim covers shareholders who acquired Woolworths shares between 26 February 2010 and 8 September 2025. It alleges that Woolworths did not adequately record and account for employee entitlements owed to salaried staff, resulting in financial statements that understated expenses and overstated profits. According to the pleadings, these accounting issues had the effect of artificially inflating Woolworths’ share price, causing losses to investors once the extent of the underpayments began to emerge through company disclosures.

Woolworths has previously acknowledged underpayment issues across its workforce, announcing remediation programs and provisions running into the hundreds of millions of dollars. The class action contends that the company’s disclosures came too late and failed to provide the market with an accurate picture of its true financial position during the relevant period. Investors who purchased shares while the alleged misstatements were in place are now seeking compensation for losses suffered when the share price adjusted.

Participation in the class action is open to eligible shareholders on a no-cost basis, with Litigation Lending covering the legal costs of running the claim. Any funding commission or reimbursement payable to the funder would be subject to approval by the court, consistent with Australia’s regulatory framework for funded class actions.

Commercial Regulatory Issues

Federal Legislation Targeting Foreign Litigation Funders Raises Industry Alarm

By John Freund |

A new federal bill seeking to restrict foreign investment in U.S. litigation is drawing sharp criticism from international litigation funders who warn the measure could significantly disrupt the industry. The legislation, introduced by Rep. Ben Cline (R-Va.), would prohibit sovereign wealth funds from backing U.S. lawsuits and impose disclosure requirements on overseas investors participating in American litigation.

According to Bloomberg Law, the proposed bill (H.R. 2675) has major implications for prominent funders including Burford Capital, Fortress Investment Group, Omni Bridgeway, Ares Management, and BlackRock. Susan Dunn of UK-based Harbour Litigation Funding characterized the current political climate as increasingly "anti-foreign," suggesting that international funders are now reassessing their U.S. growth strategies in light of the legislative push.

The bill advanced from the House Judiciary Committee with a 15-11 vote in favor of recommending it to the full House. Supporters of the legislation argue that foreign investment in U.S. litigation raises national security concerns and could allow hostile nations to influence American legal proceedings. Critics counter that the measure unfairly targets legitimate business practices and could reduce access to justice by limiting available capital for plaintiffs pursuing meritorious claims.

The legislation represents the latest effort in a years-long campaign by insurance industry groups and business organizations to increase regulation of third-party litigation funding. If enacted, the restrictions on foreign investment could reshape the competitive landscape of the U.S. litigation finance market, where international funders currently play a significant role.