LegalPay – The startups frenzy has yet to reach the legal space in India. But that doesn’t mean it has nothing to offers new businesses. If you squint, you’ll find some companies trying to take advantage of this space to address gaps with technology driven solution. LegalPay is one of those rare startup.
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LegalPay founder and CEO, Kundan Shahi, describes it as a fintech company that caters to the legal expense markets with services such as third party litigation financing.
Interestingly, these financing concept have been around for quite some time & enjoy similar acceptability to the mainstream in the West. But the same cannot be said for India, as many believed this to be illegal. Shahi point out that in 2018 the Supreme Court clarified that it was never prescribed.
Shahi has had an ongoing interest in the legal space and his first leg was Advok8, a legal tech startup founded in 2016.
In developed economies, legal fees spent by listed companies can be recovered through legal insurance, but it is almost non existent in India. This creates an obstacle to access justice. Therefore, there is no level playing field for everyone, he added.
This inspired Shahi to explore the legal expense space, leading to the birth of LegalPay in 2019.
First is litigation financing in which a third party takes care of your legal expenses. Shahi describes this as a post event process. There is an incentive for this the litigant who work with the company do not have to pay the financier if there is no favorable judgments. Following a non-recourse method, the firm only takes a percentage of the litigation proceed if their client wins the litigations.
Shahi acknowledges that this business model is risky. Basically, you’re transferring your financial risk to the company, he explains.
The second offering is interim financing: a short term loan given to a cash-strapped company while it tries to find a mode of long term financing.
LegalPay already scored a headline grabbing victory in this space last year with the revival of Yashomati Hospital through interim funding. When Bangalore based Yashomati Hospital filed for bankruptcy in 2021, there was a risk that its valuations would drop and it would be liquidated. At the time, LegalPay financed Rs 3 to 4 crore to the company to revive it. Within nine months of funding, the hospital was revived and LegalPay folded with a 26% returns.