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LexShares’ Diamond Mine technology.
The online litigation finance firm LexShares Inc. announced for the first time Tuesday the number of cases that its proprietary software has generated as potential investment opportunities.The figures show that LexShares’ “Diamond Mine“ platform, which scours court filings for potential investment leads, has in the first half of the year been able to identify a large number of cases (436) that the Boston- and New York-based company said led to litigants seeking financing of up to $540 million.LexShares’ data also shows how human due diligence greatly reduces the number of cases that actually receive funding. LexShares has invested in 20 cases through the first six months of the year, said Jay Greenberg, a former technology investment banker at Deutsche Bank AG who serves as LexShares’ co-founder and CEO. The majority of LexShares’ investments are around $1 million, as the firm competes to fund suits that are much smaller than the industry’s largest players , such as London-based Burford Capital Ltd. and New York-based Bentham IMF.Greenberg said his company’s diligence process has resulted in about 5 percent of the leads it generates turning into actual investments. While Greenberg said the results showed that LexShares’ technology was successful at originating potential deals, it also showed that artificial intelligence and software have a long way to go before they become reliable enough to generate investments on their own.
Jay Greenberg.
“I still think we’re a long way off from AI and predictive analytics being helpful in making underwriting decisions,” Greenberg said. “It’s helpful to provide some of our underwriters with some baseline context. And we’ve proven it’s successful at originating deals. But from a pure underwriting perspective, we’re a long way out from AI being able to successfully underwrite deals and affect pricing and make investment decisions.” LexShares raised $25 million last year to fund litigation after launching in 2014 and developing its proprietary sourcing technology shortly thereafter. The Diamond Mine platform scours federal and some state court dockets for keywords such as “breach of contract.” It then downloads cases and converts them to raw text before applying a 17-point scoring system to determine a baseline of investment opportunity.LexShares uses that information to reach out to litigants to gauge their interest in funding. The company, which launched its first marketplace fund last September, uses a traditional due diligence process before investing; former litigators assess the case’s claims and viability.Toward that end, LexShares also announced Tuesday that it had hired two former Big Law litigators in Allen Yancy and Matthew Oxman. Yancy, a former senior associate at Weil, Gotshal & Manges in New York, has joined LexShares as senior underwriter, while Oxman, a former associate at now-defunct Dewey & LeBoeuf , is serving as vice president of business development.LexShares now has 11 total employees, four of whom perform underwriting or due diligence on cases, Greenberg said. The company’s hires and disclosures come at a busy time for the litigation finance industry, which continues to seek new revenue streams .Burford Capital, which just added another former Latham & Watkins partner to its payroll, announced last week record profits for the first half of 2018 . Meanwhile, Bentham IMF has teamed up with Kobre & Kim on a new $30 million litigation finance fund for Israeli plaintiffs.

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