Venture capitalists invest in early stage growth companies, typically in high technology industries, such as biotechnology, energy, or IT. While many of these investments go on to become Tesla, Amazon, or the next life-saving pharmaceutical, about 65% of venture financings return 0-1x. Many of these investments fail simply by virtue of the high-risk nature of venture capital: the product never garners adoption, or a competitor develops more rapidly. These are anticipated risks, and top venture capitalists can be valuable in their ability to help their portfolio companies adroitly navigate these pitfalls.
Some of these investments, however, fail because a strategic partner misappropriates a trade secret, or a buyer breaches a contract, or an established player seeks to illegally preclude a start-up’s development. Venture capitalists are not as well equipped to navigate these pitfalls, and when faced with these challenges might not be in a position to devote fresh capital and resources to defend the portfolio company.
A few reasons why:
Litigation funding companies, such as Lake Whillans, can help venture capital portfolio companies that have nowhere else to turn. In these scenarios, litigation financiers can provide financing to both sustain the company’s operations and pursue any legal remedies. Lake Whillans, for example, does not face the same obstacles that venture capitalists do. Our investment team is composed of lawyers whose core expertise is assessing legal claims; our business model accounts for lower returns on a per investment basis than a typical venture capitalist; and 100% of our capital is dedicated to investing in legal claims.
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