In the evolving landscape of litigation finance, misconceptions about the role and value of advisory services continue to persist. At Westfleet Advisors, we frequently encounter these myths in our conversations with law firms and clients. While the industry has matured significantly, there remains considerable confusion about when and why to engage an advisory firm. Let’s examine some of the most common myths and reveal the realities of litigation finance advisory services.
1. MYTH: A Litigation Finance Advisor’s Main Role is Making Introductions
Many potential litigation funding clients assume that Westfleet primarily serves as a matchmaker, simply introducing them to funders. This vastly understates our comprehensive role throughout the entire funding process.
In reality, securing optimal litigation funding involves a complex, multi-stage process requiring specialized expertise at every step. Before any introductions occur, Westfleet develops comprehensive investment memoranda, creates detailed financial models, and structures data rooms that present opportunities in ways that resonate with funders. This preparation phase is crucial, as it anticipates and addresses potential funder concerns upfront, significantly improving the likelihood of successful funding.
Throughout the process, Westfleet orchestrates a carefully coordinated funding strategy designed to create competitive tension. We strategically time outreach to different funders, manage parallel discussions and negotiations, and maintain deal momentum through all stages. We coordinate due diligence requests to minimize the burden on clients while facilitating efficient information flow between all parties.
Westfleet provides sophisticated analysis to help clients evaluate different funding proposals as term sheets come in. This includes modeling various recovery scenarios, comparing complex deal structures, analyzing waterfall provisions, and evaluating the true cost of capital under different terms. Our market knowledge proves invaluable in negotiations, as we understand which terms are truly “market” versus outliers, which provisions different funders consider critical, and how to structure creative solutions to bridge gaps.
During the intensive due diligence phase that occurs after a term sheet is signed, Westfleet coordinates information requests and responses, manages meetings and calls, troubleshoots issues as they arise, and maintains momentum toward closing. We provide strategic counsel at every stage based on deep market knowledge and experience derived from numerous transactions, helping clients avoid common pitfalls and make informed decisions.
2. MYTH: Engaging an Advisor Slows Down the Process
Contrary to the belief that engaging Westfleet adds unnecessary layers and time to the funding process, our involvement accelerates the path to funding while simultaneously improving terms. The reality is that we serve as process accelerants in several critical ways.
Proper preparation prevents delays by ensuring all necessary materials are prepared correctly before approaching funders. Our investment memoranda anticipate and address key diligence questions upfront, data rooms are organized efficiently from the start, and financial models provide the analysis funders prefer. This thorough preparation prevents the stops and starts that often plague direct approaches to funders.
Westfleet runs organized processes with clear timelines, manages parallel discussions with multiple funders, coordinates information flow, and maintains critical deal momentum. We help clients avoid time-consuming mistakes such as approaching funders before being fully prepared, failing to anticipate standard diligence requests, getting bogged down in unproductive negotiations, or losing momentum at critical junctures.
Funders prioritize professionally managed processes because opportunities are properly packaged, information is readily available, competitive tension exists, timelines are clear, and our team keeps things on track. Rather than having the same conversations repeatedly with different funders, Westfleet coordinates efficient group diligence sessions, manages information requests centrally, anticipates and prepares for standard questions, and keeps the process moving forward systematically.
3. MYTH: Law Firms That Already Have Funder Relationships Do Not Need an Advisor
Law firms face unique challenges when directly negotiating litigation funding. Professional ethics rules require maintaining independent judgment, and direct negotiations with funders can create potential conflicts of interest. The dual role of advocate in litigation and negotiator in funding can be problematic, especially when client interests in the funding transaction may not perfectly align with firm interests. Westfleet provides valuable separation between these roles, allowing law firms to focus on their core function –litigating the case.
Beyond ethical considerations, there are compelling practical reasons why law firms benefit from working with Westfleet. Litigators are experts at litigation, but not necessarily at financial modeling of different funding structures, negotiating complex funding agreements, managing competitive funding processes, or staying current on market terms and pricing. Working with Westfleet allows lawyers to focus on case preparation rather than funding logistics.
The process of managing funding is time-intensive, and law firm time spent on funding negotiations is often not billable. Westfleet handles the heavy lifting of preparing marketing materials, managing data rooms, coordinating diligence requests, negotiating terms, and driving the process to closure. Even firms with strong funder relationships rarely have current data on market pricing across all funders, visibility into different funders’ current investment priorities, knowledge of new market entrants, understanding of which funders are currently raising/deploying capital, or insight into personnel changes affecting funding decisions.
4. MYTH: Advisory Fees Make Deals More Expensive
Looking at the overall economics of litigation funding transactions reveals that Westfleet’s fees typically represent a small fraction of the value we create through improved terms and optimized structures. The litigation funding market remains notably opaque and inefficient, with wide variations in pricing between funders, different return expectations across firms, varying risk appetites and portfolio needs, and complex fee structures. By creating competition among funders, Westfleet frequently secures pricing improvements that dwarf our fees.
Our experienced team helps structure deals more efficiently through appropriate sizing of funding commitments, optimal waterfall arrangements, strategic deployment schedules, and creative solutions to bridge gaps. Our market knowledge helps clients avoid costly mistakes such as overpricing by single funders, suboptimal structure choices, unnecessary terms and conditions, and inefficient deployment arrangements.
Professional process management reduces time spent by internal teams, legal costs for document review, management distraction, and risk of failed processes. Beyond immediate pricing, Westfleet helps secure more flexible terms, better alignment provisions, clearer documentation, and smoother ongoing relationships. We structure our fees to align interests. Westfleet’s compensation is paid only upon consummation of the funding transaction and is included in the funding commitment.
5. MYTH: Westfleet Adds an Unnecessary Layer Between Client and Funder
Westfleet functions more like an air traffic controller than a gatekeeper. We efficiently coordinate multiple parallel discussions, ensure information flows smoothly to all parties, prevent bottlenecks and conflicts, maintain clear lines of communication, and keep everyone focused on key objectives.
Instead of clients and their counsel having to respond separately to each funder’s questions, track multiple information requests, manage multiple data rooms, and coordinate multiple diligence calls, Westfleet provides centralized information management, coordinated responses to common questions, efficient group diligence sessions, and a single point of contact for all parties.
Our team bridges communication gaps by translating funder terminology and concepts for clients, explaining client objectives in funder-friendly terms, clarifying technical aspects of proposals, and avoiding misunderstandings that can derail deals. We provide a necessary buffer during sensitive negotiations, when managing competitive tension, when delivering difficult messages, or when timing is strategically important.
6. MYTH: Strong Cases Don’t Need An Advisor Since They’ll Attract Good Terms
The litigation funding market remains remarkably inefficient. Investment return expectations vary widely, and each funder has distinct risk appetites and investment criteria. Even for identical opportunities, pricing can vary dramatically. The complexity of deal terms makes direct comparisons challenging.
Funders naturally offer their best terms when they know they’re competing. Even for excellent cases, a single funder has little incentive to offer their best terms initial offers tend to be conservative, funders expect negotiation and leave room to improve terms, and only real competition drives optimal pricing. For strong cases, Westfleet can run controlled auctions, create competitive tension, time market approaches strategically, negotiate from strength, and drive terms to their optimal point.
A funder who believes they’re the first option won’t lead with their best offer. Even for excellent cases, a sole funder will present conservative initial terms, knowing they can always improve them if pushed. But when that same funder knows they’re competing against others, their first proposal dramatically improves. Westfleet leverages this dynamic by approaching a select group of funders simultaneously, thereby maintaining competitive tension throughout negotiations.
7. MYTH: You Should First Try To Obtain Funding on Your Own Before Hiring An Advisor
Once a funder has passed on an opportunity, they are often less likely to reconsider it, even with Westfleet involved. Funders form quick judgments about opportunities, initial passes are difficult to overcome, even strong cases can be dismissed due to poor presentation, and reapproaching funders signals potential issues.
First impressions matter in litigation funding. When a funder passes on an opportunity, that judgment tends to stick. Even strong cases can face immediate rejection due to poor presentation, and attempting to revive interest later can be challenging at best.
A failed direct approach can signal to the market that there might be hidden problems, create a negative perception that’s hard to overcome, reduce competitive tension in future processes, and limit the universe of potential funders. Starting with Westfleet ensures opportunities are properly packaged from the start through comprehensive investment memoranda, well-organized data rooms, clear financial models, anticipation of key questions, and professional presentation materials.
8. MYTH: Attorneys With Strong Direct Relationships with Multiple Funders Don’t Need an Advisor
The litigation funding market is in constant flux, with notable players exiting the industry, numerous professional lateral moves, significant shifts in capital deployment, changes in investment criteria, and new market entrants. Fund lifecycle dynamics often influence funder behavior, with different approaches taken early in fund life (aggressive deployment), mid-fund (more selective approach), late in fund (focus on portfolio management), and with new funds (fresh mandate and criteria).
Each funder’s portfolio constraints shape their decisions. Case type, industry, geography, and law firm concentration limits affect their appetite for specific deals. Recent wins and losses also shift risk appetite and investment preferences. Leadership changes can also affect the funder’s approach to future investment opportunities. Broader market forces—from interest rates to capital availability—further influence each funder’s approach. Understanding these complex dynamics is crucial for success.
Strong funder relationships are valuable assets, but they’re best leveraged through Westfleet’s comprehensive market knowledge and ability to drive optimal outcomes while preserving those relationships.
Conclusion
Westfleet’s role extends far beyond simple introductions or process management. In an increasingly complex and evolving market, we provide crucial expertise, market intelligence, and professional guidance that creates substantial value for our clients. Understanding the reality behind these common myths helps law firms and clients make informed decisions about when and how to engage our services in their pursuit of litigation funding.