Neil Patel

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In the ever-evolving landscape of business and finance, there are tales that stand out as truly unique, and the story of Legalist and its co-founder and CEO, Eva Shang, is one such narrative. This entrepreneur had a unique approach, distinctly characterized by innovation and strategic thinking.

With a focus on a robust team, Eva carved a path in financing litigation, raising a substantial billion-dollar investment. She talks about her intriguing journey leading an underdog team that initially diverged from the traditional asset management profile, embracing a tech-centric strategy.

Eva’s company, Legalist, has attracted funding from top-tier investors like Y Combinator, Rough Draft Ventures, and Refactor Capital.

In this episode, you will learn:

  • Eva Shang’s journey from a suburban background to a Harvard dropout showcases the transformative power of unconventional paths in the entrepreneurial world.
  • Legalist’s shift from legal analytics to litigation finance, under the guidance of Y Combinator, highlights the importance of adaptability and seizing new opportunities.
  • Legalist’s decision to raise institutional funds rather than rely on debt facilities demonstrates a strategic approach, avoiding the pitfalls of debt-driven growth.
  • Legalist aims to be the next-gen multi-strategy investment firm, leveraging its technology platform for alpha generation across diverse markets.
  • Legalist’s success is attributed to their innovative use of technology, allowing them to make smaller, high-return investments and stand out in the legal finance space.
  • Eva Shang’s advice emphasizes the importance of trusting oneself and recognizing that advice, even from successful individuals, may not directly apply to every unique entrepreneurial journey.
  • The rise of legal finance as a common form of financing, coupled with the relaxing of rules around law firm ownership, signals a broader trend that could drive down legal service costs for the benefit of both clients and businesses.


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About Eva Shang:

Eva Shang is the co-founder and CEO of Legalist. She is a Harvard drop-out, a Thiel Fellow, and was awarded Forbes 30 under 30 in 2018.

After founding Legalist at the age of 20, Eva led the company through Y Combinator’s S16 accelerator program. Legalist raised its inaugural fund of $10.25 million in 2017 and its second fund of $100 million in 2019.

Eva has been featured in the New Yorker, the Wall Street Journal, the Boston Globe, and other news outlets for her work on Legalist and access to justice.

Along with her sister Melissa, Eva is the co-author of Mia Lee is Wheeling Through Middle School, a middle-grade novel starring a girl with a disability.

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Connect with Eva Shang:

Read the Full Transcription of the Interview:

Alejandro Cremades: Already hello everyone and welcome to the dealmakerr show. So today today we have a really exciting founder. You know quite a unique you know type of um, you know approach you know when it comes to what they they’re building what she’s building with her team basically their financing litigation. You know and they’ve raised you know quite a bit of money we’re talking about a billion that they’re deploying but a very unique and interesting approach I mean during the ah episode 2 today. We’re gonna be talking about really you know how they went about doing this because they were at the beginning the underdog you know they were not the yeah. The type of asset management heavy you know type of profile more on the tech side. Also how they went about launching the different funds as well as you know, government contracts and financing and things of that nature that they have been you know engaged with so. Really a very unique approach. You know on how they’re building things. You know what they’re doing and I think it’s going to be a very inspiring conversation on you know what it comes down to the stuff that we like to hear when it’s when it comes to building scaling and and so forth. So I think without further ado let’s welcome our guest today.

Eva Shang: Hello Thank you for having me.

Alejandro Cremades: Iva shang so originally born in China and then raised in Philadelphia and Youra walk through memory lane. How was life growing up.

Eva Shang: Um, so growing up I lived outside the suburbs of Philadelphia and I think the biggest turning point for me was going to harvard in 2013? Um, and going from you know, a pretty typical suburban background to Harvard where you know you had people coming from all around the world who are really the cream of the crop many of them from generations of wealth and that really opened my eyes to like the. Realm of things that were possible in the world and I think kicked us off on our entrepreneurial journey.

Alejandro Cremades: Now 1 thing that is really interesting. There is obviously pivotal moment going to Harvard. But then you decided that you wanted to drop out. You know I’m sure that and I was not an easy conversation with your parents.

Eva Shang: Um, yeah, that’s right? So luckily I had the support of the teal fellowship which if you’ve heard about it. Peter Thiel has his program where he sponsors. Ah, young people to drop out of school with $100000 over 2 years to basically do anything so in 2 16 I got awarded the teal fellowship and the you know the teal fellowship is really just such an interesting group of people because. Um, it really self selects for people who don’t think like the rest and even today most of the teal fellows I know they either went and became super super successful doing whatever it is that they did or you know they went totally off the grid and became a hermit or now own a ranch in Wyoming. And it’s the type of group that really bifurcates into like whether they want to compete in the commercial realm or whether they just want to do their own thing so I was really lucky to have the support of the teal fellowship and I think that was also an introduction for me in the fact that you know at Harvard you have this idea that you have to do a certain set of things. So if you went to Harvard. It’s because you were a crazy achiever you love to achieve things. Um, you want to get that internship at the Goldman Sachs you know you want to get that internship at Vain Bc G Mckinsey

Eva Shang: And then you know you want to go into banking for 2 years and then go into private equity and then go and work at a hedge fund but you know once I got into the teal fellowship. A lot of the folks there. Um, you know they didn’t want what everyone else wanted they wanted to hack in their own basement or they wanted to do math equations and. That I think is really what that community has really helped me to see that all the possibilities that there are in the world. Not just the path that everyone says you have to go down.

Alejandro Cremades: So what was that journey like of going through the fellowship and then getting that transition into into y comminator as well. You know what was the the process of incubating you know the idea you know for what will become you know, ultimately legalist and. And then going through Y Communator two and and obviously as you were saying you had this the support of the th um fellowship. So how was that like.

Eva Shang: So my co-founder Christian and I applied to y combinator in 162 and um, the in the interview process. Ah they ask you a bunch of questions about your business model about what you’re planning to do about how committed you are to the company. And the 2 of us rehearsed for many months you know we tried to interview with as many yc founders as we could um why c founders have this community where they do mock interviews with each other so you can pretty much reach out to any yc alum and say would you be willing to do a mock interview with me and usually they’ll say yes. And that’s another community that has this very unique supportive feature to it so we did a bunch of these yc mock interviews and 1 thing that we learned was there is only 1 question that you have to answer correctly and that 1 question you have to answer correctly is are you doing this full-time. Because you see yc doesn’t want to invest in founders that are only partially committed to doing their company and that’s one of the things that they’re most wary about with students and with Harvard students in particular Harvard students have this excellent career path but they could go down if they didn’t do their company. So it was really strongly encouraged that we say yes, we’re doing this full time whether or not um, you know we were actually planning to do it full time so we get to the yc interview and you know there’s.

Eva Shang: 2 or 3 yc partners in the room and they’re asking us questions and K Christian and I have rehearsed so we’re just you know, nailing all the questions and then it gets to the 1 question for which there’s only one answer which is are you working on this full time and for some reason I just freeze up and I give. And inappropriately honest answer which is well you know if we get funding for it if I get the teal fellowship. You know then maybe I will consider doing this full time and that was totally the wrong answer. So after we came out of the Yc interview. Um, it was such a moment of defeat where it was like everything had been handed to us on a platter and I just tossed the platter away and so for that the rest of that entire day we thought that we hadn’t gotten in but I think that the the secret for me was um that you can do everything wrong, but if you’re doing at least 1 thing. That’s right. And in this case, you know we had told the yc partners that because of this database we could actually reach out to attorneys before they even knew things that had happened on their cases and have the information before they did and in that moment 1 of the partners who was interviewing us. Um, he just made like a shocked face. And he said holy shit. That’s incredible and I think that was the moment that overrode all the negative answers or all the incorrect answers that I had given so we ended up getting a call later that day got into yc and yc was another really pivotal transformational moment for us.

Eva Shang: Um, once we got to yc the general counsel at yc John Levy was actually the one who gave us the impetus for our eventual true business idea that became legalist.

Alejandro Cremades: So then how how did that brainstorming process come you know like where you were like okay this makes sense and then what was that process of polishing it all the way until it was like actually tangible and you guys were like okay this is it. Let’s go.

Eva Shang: So the idea that we had coming into yc was a legal analytics product as I mentioned so Christian and I were working on this idea back at Harvard and we had scraped all of this data from the Massachusetts state court system and the idea initially was to package up all that data. And then to sell it back to attorneys in some way shape or form and once we got to ycjohnlevy was the one who said you know I actually don’t think this is a very good idea I don’t really like this idea and I don’t really think that you should be pursuing it because 1 attorneys hate paying for things and 2 even. If you knew that their case was or wasn’t going to be successful. Don’t you think they already know that like they’re working by the billable hour. They have no incentive to tell the client this is a terrible case or even if they do they’ve already told the client and the client doesn’t care. So what I would recommend that you do instead with this information is I would recommend you go and look into this asset class known as litigation financing I think earlier you you called it. Third party financing. So. It’s also called third party party financing especially in other countries. So in 2 16 litigation financing was um. Already a pretty hot space for funds and institutional investors and our idea was that we could take this tech that we had built that finds cases that have past major dispositive motion hurdles that make them more likely to be successful and then we could.

Eva Shang: Using that information reach out to them and say hey this is a great time for your case to get financing. We think it’s about to settle would you be interested in um, taking a look at whether we could fund the budget going forward and um, when John Levy pitched the idea to us. You know we had the tech for it. But what we needed was we needed to have actual money to invest so having this knowledge is 1 thing but unless you’re able to actually act on it and deploy the capital or have capital to deploy. It’s like a Vc knowing which companies are the best. You know there’s not really if you don’t have money to invest in them. What are you going to do with that information so we set about trying to raise our first litigation finance fund in 17 um, a year later we had scraped together around $10000000 and that was our first fun 1 and the process of getting from just the idea demo day at y combinator to a $10000000 litigation finance fund was nontrivial. It was significantly harder than I think any of us had anticipated going from just a tech product to. Yes, please trust us to invest in your money in successful itations. So we invest in 30 something cases and of those 30 something cases. We had a 70% success rate and a 23% ultimate net ir but I don’t think that any of the investors who put money into that first fund.

Eva Shang: Had any guarantees going in that that would be the outcome and it was only because we proved out that we could use our technology to make these successful investments that had relatively short durations that we were able to move on and raise fund to which was a $100000000 fund and that one was our first institutional fund.

Alejandro Cremades: So how do you go from fun 1 to fun two because I mean know is a fun one. You were scrambling to get that 10000000 you didn’t have the track record you know to be able to leverage that and now you know I’m fun too. You have you know those say metrics that you just alluded to.

Eva Shang: Um.

Alejandro Cremades: And obviously it becomes a little bit easier because there’s more color on the canvas. So when he came to raisingcing that 100 mill I mean it’s a big jump from 10 to 100 and especially probably the profile of people that you were ah bringing on board as well. So what? what was that journey like of of racing that and how how did you.

Eva Shang: Um, yeah I mean I I think it it was a lucky accident in a lot of ways.

Alejandro Cremades: Position things you know differently this time around.

Eva Shang: I remember going out there in fundraising for a fund too even with some of the early returns from fund one and I was talking to an investor on the phone and he said how much are you looking to raise and I said 100000000 and he said okay but how much are you actually looking to raise and so I did panned him and I was like a 100000000 but I could tell he still didn’t believe me right? He thought I was naive. He thought I didn’t know what I was doing and so when we actually ultimately went and raised that 100000000 um I think that was a big game changer for us. It also highlights a a fork in the road for what type of company we would become. So at that time around 2018 twenty nineteen there were a lot of fintech origination companies that did something very similar to us but they went down a different path so you see this in the form of companies like clearbank. For instance, that originated a niche esoteric lending product like us. Um, but instead of going down the vertically integrated path whereby they would originate the deal they would underwrite the deal and service the deal and then um ah raise money to manage all aspects of the deal like we do klearbank and other fintech originators. En masse went down this different path where they would raise a lot of vc dollars and then instead of raising their own funds. They would get a debt facility now. The challenge of the debt facility is that you have to raise equity then to pad out the bottom because nobody is going to give you one ah hundred percent of the debt

Eva Shang: So if you’re loaning out 100000000 you can maybe raise a debt facility for eighty and then you have to raise venture funding for the other twenty if you raise $20000000 of venture funding. Well you actually have to raise 25 because you still need 5000000 to run the operations of the business. So. These companies would go out. They’d raise large venture rounds and these are the companies that you’d see in Techcrunch having like ridiculously high numbers for their series a like x company raises. You know 125000000 in debt inequity now the problem with this is that the debt charges an interest rate and so. If you have competing incentives in this way where the equity investors want you to deploy as much as possible to grow as much as possible and then along the way you cut some corners you make bad investments. Well then now your returns are lower and you can’t service the debt and so a lot of these fintech origination companies get caught in this vicious cycle. Where in order to grow as fast as their venture investors wanted them to. They couldn’t underwrite properly and so then would um ah you know be caught paying interest on debt with returns that they hadn’t earned and this is something that happened to a lot of fintech origination companies and. Because we were able to raise that $100000000 fund. We weren’t forced to go down this road. We weren’t forced to take a debt facility with somewhat predatory rates because we were a small emerging fintech originator and so I think we were spared from a lot of the ah um.

Eva Shang: Ah, destruction that happened 2 fintech origination companies once interest rates rose so you know I won’t name name names. But you saw a lot of fintech origination companies who did not fundamentally have good underwriting models or even if they had good underwriting models their Vc model pushed them to. Expand beyond what could be properly underwritten. Um, and so as a result legalists was able to continue to grow and continue to scale. Um, but just at a steady linear rate as opposed to um what we would have had to if we had raised menture.

Alejandro Cremades: So now for the people that are listening to get it How much capital have you guys raised to date you know across the funds.

Eva Shang: So today we managed just under a billion dollars and that’s across 3 different strategies and could we have gotten this far if we had raised venture funding I actually don’t think we could have if we had raised venture funding. Um, then instead of just deploying 100000000 slowly carefully. Over two and a half years like we did with our fund too. We might have been pushed to deploy 300000000 that 300000000 wouldn’t have gone as well and then we wouldn’t have been able to service our debt and it could have gone into a real negative death spiral. Um, but instead you know at every step of the way we have had the mantra that you know what we’re doing is um. Ultimately, making the best possible investments that we can make and generating the best possible returns and then the money that we raise will follow.

Alejandro Cremades: Is this like the typical fund manager Model tool for you guys the way that you’re making money with the management fees on the care interest or how do you guys get compensated.

Eva Shang: Yeah, exactly. So it is a typical venture private equity hedge fund model built liquidity varies from fund to fund so our litigation finance funds are 2 and 20 and our um. Ah, government receivables fund is more of a liquid hedge fund structure.

Alejandro Cremades: So obviously you know when when you’re getting investors. You know they they also believe in innovation to know ah and and I’m wondering you know if you were to go to sleep tonight you wine and you wake up in a world where the vision for. Legalist is legalist is fully realized what does that world look like.

Eva Shang: So we’re hoping that legalist is going to be the next generation multi-strat investment firm. So everybody knows that hedge funds today have a variety of strategies private equity funds today have a variety of strategies. You know, um, and. What having a multi-strat firm allows you to do is it allows you to toggle between strategies as as a classes rise and fall. So do I expect that in 10 years litigation finance is going to have as high returns as it does today you know, maybe not. But what I do believe is that our technology platform has the ability to generate alpha in any number of strategies and what that tech platform allows us to do is it allows us to find some kind of government run comprehensive data source and then pick out specifically the investments that we’re looking for. Um. According to some kind of underwriting criteria. So in litigation finance we’re looking for cases that are about to resolve in government receivables. We’re looking for government contractors that have recently been awarded very large contracts and are in need of funding to scale and the reason that across these 3 somewhat. Different strategies. We’ve been able to apply our technology is because they all have alpha embedded in the markets where if you were able to find a certain type of case or a certain type of borrower you would be able to charge them interest rates at a significantly lower risk than is um.

Eva Shang: Ah, then then looks from the surface.

Alejandro Cremades: So then? so then I guess say for this 2 I mean you just hit applying our technology. You know it’s It’s definitely a different approach you know and and different background What you guys say you know have you know or the the way that you enter this because it was more like. Technology oriented versus like asset you know management you know type of Backgroundron oriented. So How did you guys navigate that and and now how do you use technology to add to your advantage as well.

Eva Shang: Yeah, so coming into the litigation finance space seven years ago our tech advantage was definitely a core feature of why lp is invested but it wasn’t the only feature. So I hear fund managers ask me this all the time where they are like oh I want to use Ai in what I do and you know my question is always is there. Some kind of repeated human- drivenven task that you want Ai to replace or do you just want to use Ai in your marketing. And they usually just say oh I don’t actually know what the Ai would replace I just want to use it in my marketing and that kind of Ai driven approach is not very useful and it’s not very good, but what. Ah, Ai has allowed us to do from the very beginning is it has allowed us to make investments at a size in a market that other folks are usually not able to so in litigation finance we have a special focus on cases that are smaller our average investment commitment per. Single litigation case is only two hundred and fifty thousand dollars so that is significantly smaller than almost any competitor in the market and even today our average deal size for an entire law firm is only around a million and that’s a.

Eva Shang: An area of litigation finance that there are very few litigation funders who can just with their team of lawyers compete with us in and so the result of that is we’re able to get higher rates using this technology that um, ah, you wouldn’t be able to get if you didn’t have it.

Alejandro Cremades: So I guess for the people that are listening to get an idea on the scope and size of legal today I mean what does that look like anything that you can share you know in terms of ah. Traction number of employees or I mean we already talked about like the 1000000000 under management I’m wondering if there’s anything else that you feel comfortable sharing.

Eva Shang: Yeah, so I mean our returns across the board have been really really strong. We have over 120 realizations on litigation finance. That’s ah one ah hundred and twenty separate investments that have fully concluded and across those realizations we have. Ah, 70% win rate and a 30% plus net ir so that’s our litigation finance product. Our government receivables product which is the newest one that one has only been around for about a year and a half it has around 230000000 of assets in it. And our investors there include a prominent university endowment um endowments and foundations some here in the bay area and the returns there are a very steady 10 to 12% every single year.

Alejandro Cremades: And obviously you’ve been at it now for a while I mean over 8 years doing this which is really incredible. Um, so if I was to put you into a time machine and let’s say I bring you back in time maybe to that moment where you know you were thinking about.

Eva Shang: That’s right.

Alejandro Cremades: Doing the dropout and and going to y combinator and and starting something of your own. Let’s say you were able to show up right there in in Harvard campus and seeing that younger self that is leaving you know university to venture into the unknown and. So you’re able to stop that younger self on the tracks and and say hey well let’s go out for a coffee and then and you’re able to give that younger self one piece of a advice before launching you know a business. What would that be and why given what you know now.

Eva Shang: I Think that piece of advice would be to trust yourself I think that when you’re young, a lot of people try to give you advice and that advice is almost always filtered through the lens of their own Experience. You can learn from others but you can’t ever learn how to be someone else So when someone else gives you advice on fundraising or managing employees or what type of business is best to Run. They’re almost always giving that advice from the lens of this is who I am and this is how I manage my employees and this is how I fundraise. And so it’s almost impossible to take their advice and to apply it directly and instead if you just take a look around you at things you’re good at and then try to do more of that that almost always leads you in the right direction. So That’s the biggest mistake that I see young entrepreneurs make that and including me, you know I made that mistake for. Many many years where I would take advice and I would apply it wholesale but every single time that I’ve done that you know even if you’re taking advice from a successful well-intentioned Billionaire It almost never works out the way that they say it’s going to because you are not them. You cannot live their life.

Alejandro Cremades: So thinking about the direction here. Um, that reminds me you know one thing that I like to ask you and that is when it comes to trends and and the market itself of third party funding. Ah, where is it going because I know that. Let’s say eight years ago when you guys got started. You know not a lot of people were were thinking and understanding. You know, third -party funding but obviously now I find that education you know around this from lawyers and and also from people that you know had a litigation going and I think that all of that has been ramping up. You know, quite nicely. So how how do you see? they. The market evolving. Where do you see it going.

Eva Shang: I think the third party litigation funding market is well on track to becoming a very common form of financing at least in the legal space and you see this across the board where lawyers are starting to realize that they have businesses just like anyone else that they are not. A tradesman who’s practicing some sort of special craft like a silversmith who needs to only teach his son and no one else and for a long time lawyers did think of themselves that way where you know they were very strictly bound by these special lawyer rules of professional conduct. Um. And I think that’s starting to change so you see this in places like Dc and Arizona and Utah that are starting to relax some of their rules around law firm ownership. So I think this is a trend across the industry that more non-lawyers Ai driven legal services. Ah tech. Companies that replace some of what a lawyer used to be and then ultimately financiers who come in and finance the operations of a law firm. It’s all going to become a lot more common and I I think that that’s going to drive down the cost of legal services which will be a benefit for everyone.

Alejandro Cremades: That’s amazing. So even for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Eva Shang: Um, they can reach out on or they are welcome to email me directly. There’s a contact form on the website and that gets always forwarded to me when it’s directed to me.

Alejandro Cremades: Amazing, well easy know hey Eva thank you so much for being on the deal maker show today. It has been an un earth to have you with us.

Eva Shang: Thank you so much.


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Neil Patel

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