Nearly all litigation finance historically has funded plaintiffs, since a funder's return depends on a claimant recovering money. But a smaller, newer category of defense-side financing has emerged, structured differently, typically as capital to cover defense costs in exchange for a fee tied to avoided liability, a favorable settlement discount, or a fixed return, rather than a share of an affirmative recovery.
Defense-side financing is most relevant to companies facing existential litigation exposure, mass tort defendants, companies in bet-the-company commercial disputes, or defendants facing a wave of coordinated claims, where the cost of an adequate defense itself becomes a balance-sheet problem independent of the merits.
Because there is no recovery to share in a pure defense posture, these structures require more creative economics than plaintiff-side funding, and the category remains considerably smaller and less standardized than the plaintiff-side market, though legal academics and specialty funders have both signaled growing interest in developing it further.