The legal services industry is one of America's biggest business sectors. It's worth more than $270bn a year, and employs more than one million lawyers. Yet until recently, it was also one of the few industries that was almost completely locked out of the capital markets.
There was effectively no way for companies, individuals and law firms to spread the costs of litigation with other partners. This meant that many potentially lucrative cases had to be dropped or abandoned. However, thanks to the efforts and innovative thinking of Chris Bogart, and his company Burford Capital, this is starting to change.
It was while working as the general counsel to media giant Time Warner that Bogart came to realise that even huge companies struggled to manage the financial risks and rewards of their ongoing legal cases effectively.
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Although he eventually left the conglomerate to work in the venture capital business, the problem stayed in his mind. A few years later, he was having dinner with a friend who was frustrated by his law firm's poor balance-sheet management. He came up with the idea of externally financing individual cases in the same way that venture capitalists fund start-ups.
So, starting in 2006, Bogart started arranging finance for his friend's firm. It was so successful that other law firms began to call him up, asking him to help them as well. As a result, he decided to set up Burford in 2009, raising $130m with an initial public offering on the London Stock Exchange.
While he knew there was huge potential demand for his services, and was confident that he could pick wise investments to back, he was initially worried about finding enough opportunities to take advantage of economies of scale.
The turning point came the next year, when a $6m investment in an Arizona real-estate dispute came good, resulting in the stake tripling. While normal practice is for the details of outcomes to be confidential, the victory was so large that Burford was forced by stockmarket rules (which mean companies have to let investors know about financially significant news) to put out a press release.
As a result, his main challenge switched from educating the market about the returns to be made from litigation finance to keeping up with the growing demand for his services.
Having raised more money, including an extra $175m in 2010, Burford currently has more than $500m in gross assets, along with a steady stream of enquiries from law firms, who want him to devise new financial structures for them.
Yet, he thinks this new sub-sector of finance still has plenty of room to grow to him, the legal industry is like "manufacturing before the development of equipment leasing".
Bogart has two main tips for would-be entrepreneurs. He is a firm believer in the importance of a good business plan. As a venture capitalist he found the sheer number of poor business plans he read "slightly depressing".
He also thinks you should make sure that "there is a large market for your service or product" out there it's a big mistake to come up with an idea for a business that depends on dominating a particular sector. Instead, "it is far better to have a small share of a huge market".
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