A claim cannot be priced accurately the day a funding agreement is signed, because the information that would make it possible to price accurately, how a key witness holds up under deposition, how a court rules on a dispositive motion, what an expert's damages number actually looks like once tested, does not exist yet. Maya Steinitz confronted this problem directly in her 2013 Vanderbilt Law Review article "How Much Is That Lawsuit in the Window? Pricing Legal Claims," and her answer is the reason almost every real funding agreement releases capital in tranches rather than as a single lump sum tied to specific case milestones such as surviving a motion to dismiss, completing key depositions, or obtaining an expert report.
Steinitz's framing borrows a tool from corporate finance: real options theory. Each tranche decision is best understood as a call option, the right but not the obligation to fund the next stage of the case once some of the uncertainty present at signing has resolved. As the case moves forward and genuinely new information arrives, both sides revise their view of what the claim is worth, and the price attached to the next tranche reflects that updated view rather than the terms struck at the very beginning. This is also why litigation finance is sometimes described as a series of compound options rather than a single investment decision: the value of funding the first stage includes the value of the option to fund, or decline to fund, every stage after it.
The practical lesson for a claimant is to read a staged agreement for what it actually says happens at each decision point, not to assume the deal signed on day one governs the whole case. Ask specifically what triggers a tranche release, what information the funder is entitled to before deciding whether to fund the next stage, and what happens contractually, not just informally, if the funder declines to advance further capital after an adverse ruling. A funder's decision not to fund a later tranche is very often a contractually anticipated outcome built into the structure from the start, not a sign of bad faith, and understanding that distinction in advance avoids a great deal of unnecessary alarm partway through a case.