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Eva Shang

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76

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2024-06-27

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2024-06-27

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1. “I remember. One of our advisors and LPs, who's a billionaire, came by our office and I was like, what's the secret to your success? And this is when I think I must have been like 22 or so. And he was like, hire good people and retain them. And I was like, well, obviously, what else? And then the farther I get into the business, the more I'm like, oh, yeah, that is the main thing. It's just that when you're at that stage, it's not apparent to you exactly how to apply it.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

2. “And it took a really long time for the moral of that story to actually become apparent to me because I was perplexed by this information for just such a long time. And it was only years later that I was like, oh, what he's really saying is when you're young, you should try to look professional and institutional. And reassure investors, especially LP investors, that you're not going to lose their money. And he was using those details to make a point, but I was just too naive to understand what he was actually saying. So, I think a lot of advice is like that if it comes to you at the wrong time, it's as good as if you didn't hear it at all.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Litigation finance is a very obscure asset class. It's really not the first thing that a college kid would think of as a business to run. And I also think that one of the features of being young is that you can't recognize or understand good advice even when it comes your way. I remember there was one other hedge fund that did credit on these P2P lending platforms that was a few years ahead of us. And back when we were trying to raise our first fund, they had already raised a few hundred million. So I went to their office and I was like, give me your advice. How did you do it? And the two tidbits that I remember from that conversation were he was like, I've got this really nice, expensive pair of shoes. They're like $700 and I also have these business cards that are very professional. And they have just a lot of heft and texture.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

4. “It was one of the early cases and it was our first loss So I just remember feeling like the entire world was falling. And we were also so young that we hadn't been through a lot of bad things happen in our life. And so Christian and I, we snuck into the back of a Costco because we didn't have a Costco membership. And then we bought those $1.50 hot dogs that they sell at Costco. And then we ate it for dinner morosely, and we were like, this is the dinner we deserve. And I can't imagine what I would have done if I had been doing this alone. So that's why I think a lot of people warn against partnerships because of the two sigma problem, where if you can't get along with your partner, then the whole firm collapses. But to us, I think it's one of our major superpowers.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Having one person be in charge. So I'll tell a story about why I think it's so difficult to do what we do or to even just start a business so young alone. So, I mean, for the record, today we have over 400 investments and 75% success rate, hundreds of realizations. But back in the day, when we had our very first case lose, it was only $150,000 investment, but it was our very first loss. And it meant a lot to us because it threw into question our entire business model.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

6. “So Christian was studying economics and computer science. I actually think he's incredibly operationally minded and just one of the smartest people I've ever met. And the crazy thing is that we've known each other for over 10 years at this point. And it's definitely one of the most important relationships in my life. And when there's a fire at the company, when the two of us leap into action to solve it, there's really nothing like it. It's like when you have someone that you've worked with for so long and you basically know what they're going to say or think before they actually say it. And over the years, a lot of people that I've talked to disparage these 50-50 partnerships because I think they think it's riskier if you can't come to an agreement. What I actually think is that anything that's so worth doing has a lot of inherent risk. And so if you make a partnership work, it can actually work much better than just”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

7. “So, I was thinking of going to law school, but what ended up happening was that in California, there is a law office study program where you can apprentice under a lawyer. And you have to study for a certain number of hours per week. And Christian and I ended up doing the law office apprenticeship program starting in 2018 with our general counsel at the time, Curtis.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Not really, but we did get a lot of questions about whether we were going to be suing media companies, and the answer was always, no, media companies are not usually very. That wasn't a question.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

9. “So, the teal fellowship is a $100,000 grant that's given to people who drop out of school. It's given to the individual rather than to the company, but it did create a little bit of a problematic situation for us early on because he was known for his own litigation funding situation.”

   2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

10. “My parents are immigrants, and so they feel. Like playing it safe is always the way to go. But while I was at Harvard, it quickly became apparent to me that nothing you do plays it safe. Like you can either be in lockstep with everyone else and do the whole recruiting for a consulting firm and then working at a consulting firm and then going to business school and then the ladder. And not take any chances, or you can choose to do something else. And for a long time, I didn't know what that something else would be. And when it presented itself to me, it became very obvious that this is the direction the universe was calling for me to go in.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

11. “So at the time that we launched, there were already public companies that were doing litigation finance. One of our LPs likes to say. He likes to say that he invests in managers where it's so time consuming and difficult to do what they've done that no one in their right mind would do it. And if they could go back in time and redo it, even the founders wouldn't do it over again. And I kind of think that our business is a lot like that. If you were to go into litigation finance at the outset, you would not want to raise a really small litigation finance fund, hire an engineering team, build an algorithm, scrape millions of court records, do hundreds of investments in a given fund. You would do what all the other litigation funders do, which is invest in 10 big cases with law firms that you're familiar with.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Exactly. Exactly. So that was pretty much all we needed to hear to actually make the switch. But then once we made the switch, it was a lot more challenging than we initially expected to actually raise a fund. There's that John F. Kennedy quote where he says, you know, we go to the moon, we choose to go to the moon, not because it is easy, but because it is hard. I think a lot of startup founders are actually the opposite where it's like, we choose to go to the moon, not because it's easy, but because we think it's going to be easy I think if we had known how difficult it would be for two 20 year olds to raise a fund to invest in litigation, it was just such a crazy idea at the time that we would have been like Yeah, no, thank you, we'll do something else”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Keep the lawyers on track. They pay the defense costs, and they really don't like that litigation funding now exists for the plaintiffs.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Yeah, so after we decided to switch to doing litigation funding, we went to John Lovey, who's the general counsel at YC, and we were like, okay, what do you know about litigation funding? And he said, the only reason I know about it is because I have friends who work in insurance. And insurance is the mirror image of litigation funding except for the defense side.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Exactly, exactly. And there are types of cases that lawyers take on contingency frequently. Contingency lawyers are the original litigation funders. But in order to put together a diversified portfolio, They only have so much time. And so they usually do things like personal injury, employment, class action, things that are predictable and where they have a lot of control and cases settle quickly. An earnout case or a commercial case or a breach of contract case, those cost hundreds of thousands, if not millions of dollars. And lawyers don't really want to put in all that time for free.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Exactly. But if the litigation wins, then we share in the upside. So we normally aim to take around 30 or 40 percent of the case, depending on how long it goes for.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

17. “What does the founder have to give up in exchange for all that financial support? What is legalist's share of the outcome? So the way that litigation finance works is”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

18. “A business that gets acquired, and I'm the founder, I've been working on this business for a long time, and after the acquisition, the company that acquired us strips away all our resources so that I don't hit my earn out. And that's part of the acquisition price. And now I file a lawsuit thinking that tomorrow I'm going to get my $10 million earn out. But in the meantime, not only have I not been paid my earn out, but I also don't have money to pay my lawyer. And so I might scrape together some change, get the complaint filed, the case is going well. You survive some initial motions, but trial is still two years away. And so that's really where a litigation funder could come in and say, okay, leave the legal fees to us. Not only will we pay for it, we'll keep your lawyer on a budget, we'll make sure the case stays on track, we'll offer our analysis of it compared to the thousands of other cases we've evaluated, and we'll make sure that you're your part.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Why would anybody want to take outside funding when they want to see it through and maximize their returns? Or are these so expensive that even the cases that are going well need a little outside financial help? So I think when people think about litigation, they imagine how it is in the movies where you file a case and then you go to trial the next day and then a judge hears your case. So in reality, what happens is, you know, let's just take a prototypical scenario where you have”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

20. “But throughout the course of the summer, he kept on saying to us, You should really consider getting into this area called litigation finance. And eventually we realized the same thing that he did, which is that lawyers don't like to pay for things. And we were like, okay, so what should we do? And basically what he said was if you're able to have this real-time coverage of all these hard to access court dockets, then what you could do theoretically is pick out the cases that are going really, really well and invest in those. You could cherry pick your own portfolio. That raises the question if they're going really, really well.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Were you also involved in Y Combinator while you were at Harvard as well? Yes. So we got into Y Combinator the summer of 2016 just off of this legal analytics idea. And after we got into Y Combinator, basically the very first day, the general counsel who kind of keeps a watch over all the legal tech companies pulls us aside and is like, I don't think your business idea is very good. I don't think this legal analytics thing is going to work out for you. Lawyers hate to pay for things. They like to get paid for things. I don't think you should be doing this. And we were like, well, we just got here. So we're going to do our old idea. Thank you very much.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Yes, exactly. And he just set them up and started trying to download and scrape all the information. Now, as it turns out, he was downloading at Too Hive A pace, and so Harvard caught on to the fact that there were just massive gigabytes of information passing through to this one dorm room in Dunster. And so he came to me and said, Would you mind if I just put these computers in your dorm room and then they can sit in your corner and then scrape using your internet? And I was like, what's going on here? And so that's kind of how I got roped into this business where we decided to form a corporation and our intent was just to download the data and then question mark, question mark.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Just go to Cambridge and talk about you drop out of Harvard at the age of 20 to start an alternative investment fund, what were you thinking? That's a great question. So back in the day, my co-founder, Christian, was actually the one who came up with the first seedlings of the idea to start legalist. And what happened was he was very interested in data scraping and he had taken some classes with a CS professor who did data scraping. And one day he decided to scrape the Massachusetts State Court record website. Now, this is a website that had cost the state $70 million to make, and it was extremely janky, and his intent was just to download all the information and then see what he could do with it. Keep in mind, he didn't have access to any of the standard web scraping equipment. He didn't have access to Amazon web services or cloud hosting. So he just bought these two Mac Minis, which are like Mac computers that don't have browsers. Little Swares.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

24. “With, but there really wasn't a dedicated alt credit fund, especially one with nearly a billion dollars in client assets, focusing on. I found this to be really fascinating, and I think you will also, with no further ado, my discussion with legalists Eva Shang. Thank you so much for having me.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Really, a fascinating combination of legal insight and technology. Initially, this began just by scraping the state of Massachusetts judicial websites, all the different cases that were there, the different motions, who the lawyers were on each side, and they had no idea what they were going to do with this data until eventually they go to Y Combinator and General Counsel there says no, you have a gold mine here, you have to focus on financing the litigation cases with a high probability of a successful outcome, but with a plaintiff doesn't have the capital to see it through and are up against the deep pocketed defendant who could just wait him out. I found Eva to be just very interesting and I'm intrigued by the business model they created really a white space that a handful of multistrat funds might have been doing something.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Out with her co founder to launch Became an alternative credit fund that specialized in litigation financing along with two other types of credit related to litigation outcomes.”

    2024-06-27 · Masters in Business · Eva Shang on Litigation Finance Funds · IDENTIFIED FROM THE TRANSCRIPT · source