Ep 12 · Louisa Klouda, Founder of Fenchurch Legal, the Litigation Finance Firm
At 31, Louisa Klouda has already spent six years running her own firm. In episode 12 of the Women in Finance podcast, the founder of Fenchurch Legal talks to our founder, Anu Chhabra-Coulter, about building a litigation finance business from scratch, the moments she thought it might not survive, and why she believes most people who put their mind to it can do the same.
From Corfu to the City
Louisa grew up on Corfu and left at 18 to study maths and economics at Newcastle University, "a bit of a climate change and shock to the system." She had always loved numbers ("the kind of teacher's pet" in maths class) and remembers watching the stock market tickers run along the bottom of the TV screen and thinking she would love to be a trader.
The turning point came through her university's finance and investment societies. A trip to London to tour different parts of the industry led to a summer internship at a proprietary trading firm, which "exposed me to this massive world that was incredibly interesting, and I still love it today." She went on to work at a wealth management and corporate broking firm in the City, where she built her expertise in secured lending, private debt and fundraising for lenders.
Taking the leap in her mid-twenties
Most founders start their first business after 40. Louisa started hers in her mid-twenties. She had the idea in the background for a while; what made it real was a commitment of financial backing. "If I've got the money and I've got the idea and the willingness to commit to the work, then I have to do it."
Being young made the risk easier to take. "I didn't have a mortgage. I just had rent to pay. I didn't have any dependants… If it doesn't work out, we'll just start again, or I'll go and find another job."
Her values are not complicated, she says: stress management, discipline and hard work. "It's the long days. It's the holidays you can never have without picking the phone up. It's what happens at the end of the month if you can't make payroll."
Litigation finance as private credit
Litigation finance means paying the costs of a legal case for people who can't afford to run it themselves. Fenchurch Legal funds law firms, which run cases on behalf of their clients. When a case settles, "the end claimant gets back their damages, the law firm gets their fees, we get our money back plus our interest, and it's a kind of win-win scenario."
Louisa saw a gap: nobody was treating litigation finance as a private credit opportunity. She combined her background in structuring and fundraising for lenders with an asset class she found fascinating. "With any type of lending, you lend against an asset… If it's a tangible asset, it's boring. But if you're investing in a case, you start to think about prospects, processes, the people managing it."
She is keen to correct a common misconception. Most people picture the headline-grabbing court battles, with multi-million settlements and "big risk or gambling, binary results." Fenchurch Legal works at the other end of the market: small-value claims brought at high volume by everyday consumers, packaged in a way that mitigates the downside.
How the firm decides what to fund
Rather than assessing cases one by one, Fenchurch Legal underwrites case types and law firms. For each case type, the firm gets a barrister's opinion that there is strong enough legal precedent and case law to support settlement. It then carries out firm-level due diligence on the law firm: its processes, people, systems, criteria and insurance. Onboarding a new law firm typically takes eight to twelve weeks. "We don't expect 100% success, of course, but we expect above 80%. As long as you can maintain levels above that, it's sustainable."
The biggest risk is not understanding the asset. "Somebody going blind lending into a law firm, I'd say run a mile." Every borrower is monitored from day one, and technology is essential: tracking case status, progress and loan performance across a very high volume of claims.
Ethics are part of the decision too. Every case type the firm funds has a consumer element it is happy to support. "If something came across our desk that didn't fit our ethical criteria, we wouldn't fund it. It's very simple." The case type closest to her heart is housing disrepair, helping people living in poor housing conditions across the UK get repairs made and receive damages.
The first investor, and the hard moments
Fenchurch Legal's first external investor arrived after a year of trading, a short track record by any standard. "One of the second or third phone calls we had was, 'You don't even have audited accounts yet.'" The team delivered its first audit in about three and a half months, "which is insanely fast if you know anything about auditors," and won the investor over with its model, its team and its story. "They believed in us as a company… I remember it like it was yesterday." That raise took the business to the next level.
There have also been moments when Louisa wondered whether the business would make it. In investing, a big default or an investor pulling out has a knock-on effect on everything. When one investor stepped back for reasons of its own, the lesson was to diversify: "I don't want to rely on one. I want to have multiple." The hardest decisions have been enforcing security when borrowers default or misuse funds, because "we've borrowed money from investors and have to return it to them."
Her first client taught the team the most ("your little guinea pig, where you're asking more questions to them rather than the other way round") and has since tripled in size with Fenchurch Legal's funding.
An asset class coming of age
Over the past five to seven years, Louisa has watched litigation finance move from something few people had heard of to part of private debt allocations in the UK, Australia and Europe. She sees two trends shaping it: investors looking for social impact in their portfolios, and high-profile court cases giving the industry better publicity.
What she would do differently, and her advice
With hindsight, Louisa would have hired staff earlier and put systems, controls and processes in place from the start. "When you're starting a business, you don't even know what you don't know." In a large company, HR, finance and legal simply happen in the background; as a founder, someone has to build them. Her advice: seek out as much advice as you can, read, take courses, ask questions, "and ask for support. Most people are willing to give it."
To anyone thinking of starting a company: "Just do it. What's the worst that can happen?" You need to be organised, committed and disciplined, and willing to sacrifice personal time and probably money at the start. "But imagine the good things that could come off the back of it, if it does work."
Today her motivation has shifted towards her team. "We've built a great team and they're fully invested… I want to do better for them too."
She closes with a message for Women in Finance Group members. She had many people supporting her on her journey, "and I would be nowhere without them," and she wants to give that support back. "If you want to take that leap of setting up a business, you need to find the right people to help push you forward… Being part of a group that can support you and help push you forward is incredibly powerful."