Funders, Experts, and the Chicken-and-Egg Paradox of Litigation Finance

In the landscape of third-party funding, decisions are rarely made in a vacuum. The legal merits of a case are indispensable but seldom sufficient. The ability to quantify damages credibly, to translate allegations into numbers supported by verifiable data, is what often determines whether a claim will move from an intriguing opportunity to an investable asset. 

Yet, in practice, that very quantification depends on technical reports and independent studies that claimants frequently cannot afford without external capital. Thus emerges one of the most persistent paradoxes in the litigation finance industry: the chicken-and-egg problem of funding technical expertise before funding itself exists.

The dilemma is particularly visible in sectors such as construction, energy, antitrust, and intellectual property, where the technical quantification of loss can be as decisive as the legal merits. A claim may appear strong on paper, yet remain impossible to underwrite without an initial engineering, forensic accounting, or economic report to substantiate causation and loss.

From the funder’s perspective, the challenge is both structural and practical. At an early assessment stage, the funder must determine not only whether a claim is legally sound but whether it is economically viable. That requires a level of technical insight — into causation, loss metrics, market benchmarks, or operational inefficiencies — that legal counsel alone may not be equipped to provide. Yet allocating capital to commission technical reports before an investment decision would undermine the risk discipline on which the funding model is built.

For claimants and their lawyers, however, credible technical backing is often critical. A case without quantified loss, or based solely on legal argument, rarely advances beyond an initial screening with any institutional funder. In complex or technical disputes, an expert’s early input can significantly influence the outcome of that first evaluation. It may reveal new heads of loss, confirm causation, or even show that the losses are materially lower than initially thought — all of which directly shape a funder’s perception of proportionality and risk. Yet, as the cost of expert work continues to rise, many claimants find themselves unable to obtain precisely the studies that could make their case fundable.

This tension reveals an important truth: for funders, the most useful reports are often those produced before funding is secured. A legal due diligence can test jurisdiction, liability, and enforceability, but without a sound assessment of the underlying technical data, an investment decision remains largely theoretical. To invest responsibly, funders need evidence not only that a right was breached but that the resulting loss is measurable, attributable, and realistically recoverable.

It is precisely because of this gap that a new category of professionals has emerged: experts who view litigation funding not as an external event, but as an integrated part of the dispute resolution process. They structure their engagements to align with the economics of funded disputes, recognizing that adaptability at the pre-funding stage often determines whether a case will ever reach the funding stage at all.

Some offer pre-funding scoping studies — concise, high-level reports that outline potential claims, estimate loss ranges, and identify critical evidentiary gaps, for a modest fixed fee. Others operate under conditional fee models, agreeing to apply discounted rates at the outset and a deferred uplift or retainer once funding is secured. There are also hybrid arrangements, where experts produce preliminary findings in exchange for a commitment to be retained for the full expert engagement after investment approval.

When engaged directly by claimants, these preliminary reports can, of course, carry a degree of bias: consciously or not, experts have an incentive to present findings in a light that maximizes the chances of obtaining funding. On the other hand, this stage gives funders an early opportunity to assess the expert’s professionalism, methodology, and objectivity — valuable indicators during due diligence. When the funder itself commissions the report, the work tends to be more independent, though these early costs are rarely absorbed by the investment if the claimant later opts to use a different expert.

From the funder’s perspective, such collaborative approaches are highly constructive. A clear, well-structured technical analysis can substantially reduce informational asymmetry during underwriting, improve communication between legal counsel and funder analysts, and accelerate decision-making. It also allows a more precise calibration of risk-adjusted returns — a necessity in a market where capital is increasingly selective and timelines for deployment are tightening.

Moreover, this interaction is gradually reshaping professional incentives. Experts who understand the rhythm of the funding cycle — that initial diligence is preliminary, not exhaustive; that funders value clarity over volume; and that deliverables must align with investment decisions rather than litigation milestones — are positioning themselves as preferred partners for both funders and law firms. Their flexibility allows them to enter early, validate key assumptions, and remain engaged throughout the case lifecycle, providing continuity and technical coherence.

By contrast, experts who hold rigidly to traditional engagement models or remain detached from the commercial realities of funded disputes may find it harder to operate effectively in this environment. It is not a matter of technical competence but of adaptability. Litigation finance operates within a pragmatic balance between capital preservation and risk appetite, and funders naturally gravitate toward professionals capable of turning complex factual narratives into clear, financeable propositions — efficiently and credibly.

This evolving interaction between funders and experts is redefining the very concept of due diligence. What was once a strictly legal exercise is now a multidisciplinary process — integrating technical, financial, and legal analyses in parallel, and often in advance of traditional legal review. As this practice consolidates, it will not only shape which cases attract capital but also guide how experts and firms position themselves within the broader funding ecosystem.