Travis Lenkner on the changing economics of law firms
- Law firm equity
Travis Lenkner, Chief Operating Officer at Burford Capital, joins an episode of the Beyond Billables: Lessons from Top Law Firm Partners podcast to discuss the changing economics of law firms, the growing role of external investment and how legal finance can support long-term growth.
He explores the limitations of traditional partnership structures, the importance of investing in talent and technology and how Burford's approach differs from conventional private equity. The conversation also covers Burford's investment in Kindleworth, the opportunities presented by AI and the future of external capital in the legal sector.
Watch the podcast below.
Transcript:
Travis Lenkner: A lot of what we see in law firms is that you rise to the top by doing a lot of really great legal work, and then one day you're tapped on the shoulder and you become the managing partner. Sometimes it works really well and sometimes it does not.
But to lead a law firm, to be a leader at Burford, or to do some of these other things, I think is much more about having a sense of the business, these global multi-billion dollar firm where it's still possible to find pockets that are not exactly being run like the businesses that they are.
Stephen Rodney: They're making pretty good money already. Just think what they could do if they actually ran themselves an inverted commas proper business.
Travis Lenkner: It's principally talent and technology that are driving investment going forward. Unfortunately, the partnership structure itself doesn't encourage, in fact, it actively discourages that investment because incentives all run to clearing the accounts at the end of the year and maximizing distributions. The important thing is what matters for these firms, what's going to happen in this industry and profession over the next decade, and how is third party capital potentially a part of that?
Stephen Rodney: Welcome to another episode of Beyond Billables: Lessons from Top Law Firm Partners, the podcast where we hear from renowned and well-known law firm partners and other leaders of the legal industry who reveal the secrets of their success. I'm Stephen Rodney, founder of Integrate Coaching, where we produce tailor-made lateral integration programs for partners moving to new firms, and previously co-founder of Fox Rodney Search. I continue to get very good feedback from the podcast, so please can I urge everyone who listens and enjoys, to subscribe if you're on YouTube or to like if you're on YouTube or any other platform. Today, I'm delighted that we are branching out again, from just having law firm leaders. Delighted to welcome Travis Lenkner, who is COO at Burford Capital. Founded in 2009, Burford is New York and London Stock Exchange listed and is the world's largest provider of commercial legal finance and has worked with hundreds of leading law firms and businesses.
A very warm welcome to you, Travis.
Travis Lenkner: Great to be here. Thanks so much for having me.
Stephen Rodney: Good. Well, maybe we could start with you telling us a little bit more about your career journey, how you came to be a lawyer initially and now eventually COO at Burford.
Travis Lenkner: Sure. Well, I'm, have the pleasure of living in London, although for Burford, I work, with our team around the world, just happened to be based here.
But, from my accent, you can tell that this is not my original home. I'm from the US, grew up on a farm and ranch in Kansas, but it was very clear early on that I was probably, going to be a words person in some respect. So, journalism was an option. I was interested in politics and government, but ultimately found my way to law school and from there to litigation. So I graduated from law school, joined a large law firm, first in Washington, DC, and then New York, and took off on the legal path from there.
Stephen Rodney: Okay. And talk us through, because I saw from assuming your LinkedIn profile is correct, so hopefully it is, that you'd kind of, you've been in law firms, you then, it appeared you joined Burford and then left and, it looked like to set up your own firm and then came back. Is that roughly right?
Travis Lenkner: Yeah, roughly right. So, I had a traditional legal career, for the first bit. Was a very fortunate to clerk, on a federal court of appeals in the United States as well as at the Supreme Court. And then was at Gibson, Dunn & Crutcher as a litigator and an appellate litigator, both in the DC and New York offices. I served for a time as senior counsel in the law department at the Boeing company, and then left Boeing to launch a litigation finance firm in 2013. And so my first entrepreneurial, effort was in this space and in this industry when it was in its very early days. We sold that business to Burford. So the LinkedIn journey, captures the transaction and my joining Burford just at the very end of 2016, so almost 10 years ago now.
My partners and I stayed at Burford for a year to integrate the teams and helped to put our private funds platform, onto Burford's already existing balance sheet investing platform. And then, we left and I launched a law firm in the US and in the UK ultimately as well, and had good success there. And that firm continues. But my family moved to London a couple of years ago, and I had the opportunity to rejoin Burford, and now I'm in this role. So a bit circuitous, but an adventure through traditional litigation, in-house practice, starting a litigation finance firm, starting and serving as managing partner of a law firm, and then, coming back to Burford and now getting to lead our investment teams day-to-day here internationally based in London, but, as well as in the United States.
Stephen Rodney: So having founded a law firm yourself, as you said, and having large amounts of experience or investing in lawyers who run the cases, and we'll come back a little bit to what, you know, Burford does in a second. So you've had basic experience from all directions in this, in this world that we live in. What do you think makes a successful partner and leader of a law firm?
Travis Lenkner: Well, I think one way to answer your question is to say that you just mentioned two different roles, and in law, we frequently conflate those, combine them in some way. And I think one thing that can help people succeed in those roles is to realize that they really rely on, in some ways, fundamentally different skills. A brilliant lawyer, whether it's a brilliant corporate lawyer or a brilliant litigator could be incredibly effective in building and maintaining client relationships, setting legal strategy, and in the day-to-day work of the practice of law. That does not necessarily mean that the same person has the background, skills, or interest, frankly, in leading organization. But a lot of what we see in law firms is that you rise to the top by doing a lot of really great legal work, and then one day you're tapped on the shoulder and you become the managing partner.
And sometimes it works really well, and sometimes it does not. So I think one of the core skills to my mind in our corner of the world is knowing the difference between those two roles and saying, "Look, it's obviously important to have a legal background, and to be able to think about what success means in the profession, but to lead a law firm, to be a leader at Burford, or to do some of these other things, I think is much more about having a sense of the business, the strategy, and the fact that the principal asset of all of these organizations, even Burford, where we have a multi-billion dollar portfolio of legal asset, our most important asset is our team. And thinking every day about leading that team, building it, expanding it and maintaining it, nurturing it on a daily basis is really what leadership in this organization is about
And that's, that's law firm leadership too.
Stephen Rodney: It's interesting that you mentioned you thought it was important to have a legal background. Do you think that still is, to lead a law firm or to lead a listed company like Burford? Do you really need to have a legal background?
Travis Lenkner: Well, as someone with a legal background, of course, I believe the answer... Stephen, you've caught me, falling victim to another one of the things that we too often do in this industry, which is to say that it's fundamentally necessary to be a lawyer in order to do some of these things. I don't think that's true, and many successful, law firms and organizations now are moving away from that. I mean, we're, we're more than a decade into the development of the C-suite in the law firm, the non-lawyer C-suite, which is a great development. And you do see increasingly CEOs, in these firms. I think when that person comes into a leadership position and doesn't have the background, what's critical is enough of the other skills to... I'm gonna use the word manage here, but it's not to lead, or to at least perhaps corral the partners in the organization, right?
One of the reasons that outside CEOs haven't been law firm leaders is because all of the other partners in the firm actually do believe it's fundamentally necessary that someone understand what they do every day in order to run the firm. And so either you find from within your ranks, or elsewhere, someone who does have that background, but who also, can do the other things, or you find the non-lawyer who is skilled enough and has enough relevant experience that a group of partners will accept, frankly, that person as a leader in the organization, and that's tough. But I think the happy medium that a lot of firms have found is the ranks of the non-lawyer, subject matter expert executives, the CFO, COO, the CTO, etc., who can come in and be the cabinet for that managing partner who does, in fact, come from the ranks of the lawyers and the partners in the firm.
But as, you know, as you point out, is it strictly necessary? No. Is it practically very helpful? I think still the answer is yes.
Stephen Rodney: Yeah, and I think from what I've seen when a CEO, and I mean, a true CEO, so I'm not talking about a firm where there might be a CEO, but the managing partner's still in charge, I'm talking about a true CEO, when they have come in, and I went, I can remember some, if they don't go well, then everyone goes, "Oh, that's because they're non-lawyers." When you have a law, a law firm partner who leads, and that goes badly, then no one says, "Oh, that's because you're a law firm partner." I mean,Clyde & Kostra is one, where the CEO isn't a lawyer and they've had that for a long time, that seems to be going fine. I think they still have a senior partner, but it's the CEO who runs the firm.
But I do find it interesting. And actually, I saw that Lisa Mayhew, who used to be the managing partner of BCLP, has gone to be the CEO of a private equity backed accountancy firm, which I thought was really interesting that you had a law firm leader moving out, because that traditionally has been difficult as well for law firm leaders to move out to non-law firms.
Travis Lenkner: Yeah, I think you're going to see more of that cross-border work, if you will. In the example you raised, as you say, there are firms that have or have had CEOs. That title can matter, but also what is the governance and organization structure around or next to that person? It's probably almost never true that is a CEO in the sense of just a widget-making company having a CEO, right?
That is probably someone who in most organizations would be, a chief operating officer, and who is reporting to an executive committee or set of managing partners that are setting strategy and ultimately approving the big decisions that the firm has made.
Stephen Rodney: I agree with that. Okay, so that's interesting. Let's come back to Burford. I mean, most people who are watching this will know the Burford funds cases, but I know that it now operates much more extensively in the legal industry. So can you tell us more about that?
Travis Lenkner: Absolutely. And, you're right, we do fund cases, and we still love to do that, but that is, I think the easiest way to explain it is to say that is the 1.0 version of Burford and of really this broader industry, but certainly of Burford's development. So when we launched in 2009, here actually with an IPO, first on the London market, it really was the funding of individual legal matters. And so the idea was I have a corporate claimant or plaintiff that needs contingent fee economics, but wants to work with a firm that doesn't offer contingent fee economics. I can fit between the two and replicate those so that the corporate claimant is paying nothing upfront for the litigation. Burford instead is paying the costs and fees associated with bringing that case, and Burford gets the spoil of the contingent uplift if it's a win and loses the investment if it's a loss.
That's the beginning and end of the story, right? that is the business as it was launched. This is now much more about, legal finance and a corporate finance tool related to litigation and legal risk that does a whole lot of things. So from single case funding came funding against portfolios of cases, came the idea of not just providing capital to pay the fees and expenses, but also to monetize, before resolution, a portion of the claim value. So a company has won a judgment, that judgment is now on appeal. They'd like to de-risk and take $20 million from a $100 million judgment, value and convert that to cash. So for other corporate purposes, right, having nothing to do with the litigation itself. From that came working more directly, both with companies and law firms to think about whole suites of litigation or practice areas that were capital starved or that would benefit from a risk sharing arrangement of some sort.
And then from that came even broader, investing and one of the directions we're going now, thinking about other aspects of the legal profession and the broader legal industry that are capital intensive, where our team and our investment skill and our underwriting acumen can be brought to bear, as well as the benefits of our strategic perch overlooking the legal industry as part of what we do every day. So that looks like law firm equity, and some of the other investments that we're making that I'm sure we'll talk about in the broader legal industry. But it really does all come back to the core idea of case funding, but today the business is much more than that.
Stephen Rodney: I mean, case funding always struck me, it's very binary, isn't it? You know, you're it's a bit like being a headhunter as I was, is that you can get very excited and you think you're very close to a big, a big fee and then it doesn't happen. But you have the added issue of you might win. I saw not very long ago you've won a very large case somewhere or other, but that's a long way from getting the money, just winning the case.
Travis Lenkner: Absolutely. I mean we've had some nice results that are in matters in which our involvement is public, and so people have reported on those over the last two or three months. But in all of the public instances that I'm familiar with, you're right, those are, very nice results for our counterparties, but they are not yet final judgments that have been collected where a wire has been sent from a defendant to a plaintiff, right? And so we live that process every day across our entire portfolio. It's interesting about it being binary. It, in some respects, yes. but when you think about investing, particularly early on in a case, the various nodes that spread out from the investment point there are hundreds of ways that a piece of litigation can progress, and different risk and different probabilities down each one of those paths.
Now, when you get to the end of one of the branches of that tree, there's only one fork left, and that's the binary yes, no. You know, we're sort of at this point, this is decision point, will it happen or not? But you start from a place of analyzing a whole lot of different possibilities and probabilities, and that, again, is in the single case investment. Of course, it's more complex and even more interesting when you're thinking about portfolios or practice groups, or some of the other corporate structures that we enter into. So it's enough to keep, a very good team, very busy, across the world all the time thinking about these issues as we look at new opportunities.
Stephen Rodney: Yes. And I didn't realize, so you mentioned that if a judgment has come out for $100 million and the company who's got the judgment, wants to monetize that, so you might look at effectively buying the judgment off them for obviously less than that if you think there's a good chance of getting an enforcement, so they get the cash upfront and you get the potential to have, to get your cash back and a lot more.
Travis Lenkner: Well, in some cases, we would make an outright purchase of a judgment or award. In other cases, to use the numbers I was using before, if you have a company that has won at trial a hundred million dollar judgment, and that judgment is now going up on appeal, that might not be a claim or judgment we would buy. It might not even be technically possible for us to buy it.
But we would potentially invest, again, say $20 million to provide to the company today to de-risk and monetize a portion of that judgment. If the company wins on appeal, we get our capital return to us plus a premium. But if the company were to lose on appeal and the judgment went away, that would be an investment loss for us. So it's very similar to single case funding. It's just that the proceeds, our capital, are not being necessarily used to pay the legal fees and costs, they're being used by the company to make an investment or expand or pursue some other aim.
Stephen Rodney: And that's irrespective of whether you were involved in the case before that.
Travis Lenkner: Correct. Correct.
Stephen Rodney: So obviously you've mentioned, looking at law firm equity investments, and that's plainly been in the news a lot. And there's a lot of froth about PE houses, really. And maybe that's because PE houses kind of like the froth thing about them. But people are aware, and I'm certainly aware of other external capital investing, potentially investing in major law firms as they've obviously done in accountancy firms. I mean, that obviously went a bit quiet. It got a lot of froth, went a bit quiet. Then we've had the MMLP invest - PE investment and morons in the, offshore and heavy rumors of Applebee being to external investment. So how do you at Burford assess that? And how are you different from a PE house in your investments, what you are asked from law firms if you are to invest in them?
Travis Lenkner: As you say, froth, chatter, activity, there's a lot of all of those things. There's, however, a mismatch, I would say, at this point between the level of chatter and, the number of actual completed transactions, certainly among leading, national and international firms. So what you see, and I think what we're likely to see for some time, is a lot more activity in the sectors that are, that are more readily corporatizable. So, you know, what I mean by that is immigration law firms, high street, property conveyancing firms. in the US, and the UK, personal injury firms, for example, those are law firms where a great deal of the work is not actually legal. and when it is legal, a good bit of the legal work is routine and, can be systematized.
And in an increasing world where technology can do a lot of these things for us, it, that technology can be brought to bear to do some of that, more mechanical, work that goes on behind the scenes. Those businesses are also usually more closely held, and so, instead of two or 300 partners, there might be two or three. And so, it's easier for those two or three partners to think about and agree on taking external investment. It's also easier for external investors to see, a strategy where they might combine with other firms, expand, introduce leverage and/or technology to increase the economics of that firm as a business and build it over time. So, those are very interesting strategies, but quite different from will a magic circle, silver circle or will an AmLaw 100 or 200 firm do that.
I think we will see that. It's a matter of when, not if, but those firms, for a host of reasons, are going to be, and so far are showing themselves to be slower to move in this direction.
Stephen Rodney: So you said for a host of reasons, so can you give us some of those?
Travis Lenkner: Some are practical, and go back to the closely held point that I made before. When you have a 200 or 300 partner group, there are a lot of different incentives and perspectives at play. You have senior partners that might benefit more from certain structures involving outside capital, junior partners that might be more skeptical about that for various reasons. So there's just the sheer political dynamic and incentive dynamic within the firm itself. Also, in the US, the transaction is necessarily synthetic, equity in the form of an MSO, a managed service organization. It is not, as is possible in the UK through an ABS, a direct corporate membership in the entity itself. That adds complexity. It also adds some regulatory uncertainty on a state-by-state basis. And so, the global firms and the firms that operate in most, if not all, states in the US are having to take a much closer look at how they would even structure an investment like that.
So I think this is still happening. Law is probably the last professional frontier to be corporatized in this way, but I think we're being dragged to it a little bit more slowly than some of the others have been. And the large law firms are going to be among the last to go.
Stephen Rodney: Let's leave the kind of the magic circle, but you... Let's call them Silver Circle, which firms, I don't know, 10 to 50 in the UK. So if you were sitting there as one of those law firm leaders, you're getting approaches, I'm sure, from all sorts of people. If I was one of those law firm leaders, so how do you pitch Burford taking an investment versus a private equity house?
Travis Lenkner: Well, I'd point fundamentally to three things. First, we are not seeking control rights in the investments that we're making. And now there, that doesn't differentiate us from all other investors in the space, but it is a differentiator from certain private equity strategies where control would be, almost required, as part of their structure. That, again, looks more like the high street firms, the more easily technologized firms that where PE investment can make a lot more sense. So we would be coming on to take a minority and a lot firm a small minority stake in a law firm and to be passive investors. So that's number one. Number two, we invest from our balance sheet, not a fund structure. We do have private funds that we manage, but Burford, principally invests its own balance sheet capital.
And one of the advantages of that is that we are not on a fund timeline where this is vintage nine and we have a certain number of years to generate a return before we have to exit this investment because our harvest period is closed and we have to shut down the fund and move on. That's not a way that we view the world, or operate here. So it allows us to be much longer term passive investors. So we're, we're the minority investor sitting passive in the firm, and we can be there for a long time without pressure for an exit or immediate changes in the business that are going to allow us to exit and achieve some great multiple over a relatively short investment horizon. So that's the second thing. And third, and possibly most importantly, I'd say we know law.
We are about 175 people globally. a significant number within that, of us are lawyers. We come from law firms and in-house counsel roles. We spend our days in our existing business working with and observing and understanding law firms, in a very fundamental way. And that is different from almost anyone else who is approaching this space and saying, "Well, you know, I did public accounting. I learned a lot. I now wanna move on to law firms." There are differences, important differences in how these organizations operate, how they approach their respective markets, and where this world is heading. And we think that for a law firm that is moving slowly to do this anyway, partly out of that reluctance, partly born out of a hesitation about the non-lawyers and the influence of outside investors, we come to it from a, just a fundamentally different perspective and understanding.
And so I think would we be effective strategic advisors and a voice in the boardroom or the executive committee room? Yes, we would. Would we bring an outside business acumen? Yes, we would. But would we also still come at it from a base understanding of what these organizations are and what they care about? Yes, we would. And so I think if you're a law firm standing at the cusp of this and trying to figure out what it would look like in a few years, I think the biggest thing is someone like a Burford as opposed to a more generic professional services investor makes a big difference in that relationship in the years once you've engaged in the transaction and, you know, now you have to live together and work together as partners. And we frankly think that's the biggest, the biggest selling point for us.
Stephen Rodney: So you have a board seat, I presume, because otherwise, how do you keep an eye? Or not necessarily.
Travis Lenkner: I think every structure is different, right? Is it a board? Is there a board seat? Are there merely advisory updates and certain, minority shareholder rights that would be pretty standard? Those are to be worked out. But regardless of the technical nature of it, you are raising equity capital by bringing someone in from the outside. If you're going to pay the cost of raising that capital, one nice gift with purchase is that the people who are now in the organization with you understand you and what it is that you're trying to do and have a valuable strategic perspective that they can bring to bear without the ability, because they're not controlling investors, without the ability to force anything on the organization, but we being, you know, a trusted partner and someone who will, little I, invest time and resource in the firm to understand and help it grow in a way that makes the investment successful, but really makes everyone win as a result of having entered into the structure.
Stephen Rodney: I can see that makes a lot of sense. I'm obviously not asking you to be specific, but in your discussions with law firms, to split down to two or three reasons, what are the reasons why those law firms, having survived this long without outside investment, why might they be thinking of taking external investment from a Burford? What are they going to do with the money?
Travis Lenkner: Well, it's principally talent and technology that are driving investment going forward. In this market, particularly in the upper echelons of firms where the talent market is so frothy to use that word from earlier, and expensive in the form of guarantees and the capital that has to be committed in order to make some of these moves happen, that is capital intensive in a way, particularly, you said, let's talk about the Silver Circle firms. I think that's right. If you're a firm in that band looking to stay competitive in this market where the firms just above you in the league table have more purchasing power, have the ability to recruit and promise partnership earnings in a way that you might not, what is the way to combat that? What is a way to remain competitive, to grow, to expand and to position yourself in this market? Most of those ways will require investment.
Unfortunately, the partnership structure itself doesn't encourage, in fact, it actively discourages that investment because incentives all run to clearing the accounts at the end of the year and maximizing distributions. That's particularly true when a lot of the decision-making power and the political power in the partnership is understandably concentrated at the senior levels. Those folks have a shorter time horizon to retirement, less of an interest in reducing this year's distribution in order to invest in something that might really pay dividends five or even 10 years down the road. So how do you account for all of that? One way is a more rational capital structure and one that allows for some of this investment and can be structured to hold harmless senior partners, if that's the wish, but to allow junior partners to set some direction of where they think the firm should go, both, investing in talent, but also some of the technological opportunities, but also expensive opportunities that are, that are presenting themselves.
So those are the two things we see the most. But inherent in your question is something important, I think, that gets lost frequently in all of the noise about law firm equity and outside investment. There does have to be a why. And so we have a lot of these conversations with firms that are wanting to learn about this and understand the structures, but use of proceeds, use of capital is a fundamental part of a conversation. And again, as investors who understand law firms and work with them every day, we are not here simply to like try to gobble up market share and nor do I think it really works that way. We are looking for strategic, long-term, relationships with firms that we think have set a course, in this market and for the years ahead and have identified capital needs or structures that would help them compete and succeed.
When those are present, you start to see, ah, okay, now we're having a great conversation about the why. And we can figure out the technical aspects of the transaction. But I, the most fun conversations for us are the conversations where someone comes in with a pretty good sense of the why, and we'll figure out some of these details as we walk down the road. Much of the noise you're seeing in the market is more about the how. Well, you know, what are the structures and what are people doing and who will come in and do what? And that's really the tail wagging the dog. The important thing is what matters for these firms? What's going to happen in this industry and profession over the next decade? And how is third party capital potentially a part of that?
Stephen Rodney: So ironically, and I think there's a thought that younger partners would miss out if there's investment, because as you said before, maybe in the senior partners would think they can grab some of the money. But what you're saying actually, I think, which makes a lot of sense to me, is that if the younger partners are sitting here thinking, well, the senior partners who are kind of running the firm are not investing sufficiently in tech or technology, and they're suspicious that is because the back of the mind of the senior partner, they don't want to depress profits because they're gonna be retiring soon and they wanna go out on bigger money. So that is actually a reason why those younger partners should be more interested in external investment from places like Burford.
Travis Lenkner: Absolutely. And, this is all about, again, the why, this is all about the structuring and what you're trying to solve for. There are some firms where the partnership structure is such that outside capital might well be used to give a group of senior partners an exit from the business and to allow, the next, the folks on the next rung of the ladder to take control and start to set direction. There are other firms where you might come in and completely upend that and say, "You know what? Senior partners really aren't participating in this. Here's the timeline for them. They're going to be kept in this band of distributions and they're agreeing to that as part of this transaction. The people organizing this are the junior partners. They're the ones who see the value of the investment that they want to make.
And as any business owner would have to be in a structure like this, they're open to some dilution because they see the power of the capital as making the overall enterprise ultimately larger, more profitable, more successful over time. And so again, why? What's the firm trying to do? Is this three senior partners at a boutique who, with an exit, can allow a transition and a succession plan to happen that would otherwise be difficult to put into place? Great. Then here's maybe where some of those dollars are going as part of outside investment. Is it something where the senior leaders are comfortable and maybe a little resistant to change? Great. They're, they're held harmless. This isn't an exit for them. This is something that the next generation is putting in place. It's all answerable through the structure if you know what you want and why you're doing it.
And the right firm, from our perspective for investment is one that has a pretty good handle on that.
Stephen Rodney: Okay. I've got another question on the investment you made in Kindleworth, but there's one question, because I was speaking to a litigation friend of mine because I was originally a litigator long time ago. And I was saying, "Oh, you know, I've got you coming on." And he said, "Well, of course, you know, if we took an investment from someone like Burford, they'd want to make sure that if all the funding and all our litigation cases was through Burford." And I said, "I didn't think that was right, but I would, I would ask you."
Travis Lenkner: No, it's not necessarily correct. I think there might be advantages to the firm for doing that, right? One issue now in the UK is that it depends on the type of firm, of course, but there are, given where we sit from a regulatory standpoint, from the types of engagements, CFAs versus DBAs that firms can enter into in certain kinds of collective proceedings, that changes how they might approach an enterprise-wide capital arrangement. And it's very different from the US where, because of the contingent fee structure that exists across all types of litigation matters, it's much easier for a firm to seek a single source of capital, cross-collateralized across all of the things or a broader group of the things that a firm might be doing. So, the short answer to your question is no, it's not a condition of our interest that a firm, be a tied house going forward, or anything like that.
And in fact, when we talk in the UK with firms, particularly firms that are focused on claimant side representation, of course, they frequently have already a lot of funding arrangements in place in various cases, and the idea is not to, upend those. The idea is to look at what the firm owns as its share, how it participates in those funding arrangements that it might have. That's the firm, right? That's the business, that's the investible opportunity, and it's up to us to see what's there and to work hand in hand with the partners at that firm. But no, it's not, this is not, using outside investment in this way to essentially get a lot of case funding. This is where the broader industry is headed and we see that.
Stephen Rodney: It's been, it's been made public that you've invested in Kindleworth, and for people, I think most people Kindleworth hide their light under a bushel quite well. Well, they have done historically, but I think maybe since you invested, they've, they've risen a little bit in terms of the profile. but for people that don't know, the way I describe Kindleworth is an organization that helps lawyers who want to set up their own firm concentrate on doing the lawyering and Kindleworth do everything else. Is that kind of that roughly correct?
Travis Lenkner: As you say, we are encouraging them to let that light shine, as much as possible. But it is a funny business to market, because as they would tell, you can't really have a dinner, or a cocktail party for prospective clients because everyone starts looking around the room saying, "Oh, you're here too. This is very interesting." So it is, they are careful, in how they, guard confidentiality and speak to people who are exploring this. But yes, at, you know, at its heart, Kindleworth is a consulting firm, not a law firm, that works with the founders of specialty firms, boutiques, people who wanna set up their own shop. And they work with them from the, from the light bulb moment and thinking about how to make that move, how to structure it, all the way through and to an ongoing relationship with the firm to provide the support services that are, that let the founders concentrate on the practice of law.
So it's HR, finance, marketing, IT, ethics, all of those important functions that if you're sitting in a chair at a law firm envisioning having your own firm, those are probably not things where you have a lot of experience or want to invest very much of your time. But we like them very much. I mean, it's been made public because we made it public, to be fair. We love the team at Kindleworth, and they have, made no secret about their expansion into the US market, which we are excited about while we also continue to support their work in the UK.
Stephen Rodney: So was that the why in terms of the strategy behind your investment into Kindleworth to enable them to expand into places like the US?
Travis Lenkner: I think that was the why for them, right? You know they also see increasingly that when people are looking to launch a firm, there are frequently capital needs that go along, with that. Now, it's sort of the same answer to your question before about do we, do we do this because we then own all the funding relationships? To be very clear, Kindleworth is not, a tide house either, right?
And so this is not something where Burford is now financing every Kindleworth launch or it's a requirement that it happen that way. We haven't changed their business, one iota in that department, but we are a strategic resource for them and for the people they're speaking to. And sometimes, an arrangement with us might be the right thing, but sometimes a more conventional banking, relationship might be the right thing and we can help, source that from people who are not called Burford. So, no, I think the why for them was expansion capital both here in the UK as well as in the US. And the why for us was seeing the era of the specialty firm and the boutique really continue to build and grow and seeing the linkage between some of those smaller, more entrepreneurial firms and the types of investments that we like to make and the firms that we want to help support.
So where there's an attractive business that helps get those firms going and keep them going over the years, that's something that we saw as very naturally symbiotic with what we do. And then separate and apart from that, just an attractive investment opportunity and a good business in its own right. We like them very much and are excited to watch them continue to grow.
Stephen Rodney: And could you see, and I don't think this has happened, but it may have done, just hasn't come out. Could you see yourselves and Kindleworth, instead of reacting to lawyers coming to you saying they want to set up, deciding to set up your own law firm and then reaching out to partners? Because it seems to me, and I will confess and if James Hacking was on, he will know this, you know, he and I worked quite closely on some potential new firms and we got there in one, but, lots of others, you know, you get people right to the end and then they, for whatever reason, they change their minds. It's very frustrating. And I often thought that, actually, if you had a vehicle that you'd already set up, it's kind of easier in a way.
So you're going out to people and saying, "Well, you'll be partners and maybe have a bit, you know, small bit of equity, but you don't have to be the founding partners because we're not really having that." So could you see that as happening?
Travis Lenkner: It's very possible. It's not something that is coming soon to a new stands near you, and it's really happened, already. But that's the type of symbiosis that I was describing, right? Like where we work every day around the world, more focused on the litigation side given what we do, but increasingly, across all law firm practice areas with, we think, some of the most talented lawyers, on earth. And those folks are also frequently entrepreneurial, and we have over the years had a lot of relationships that began when someone was sitting within a large global law firm, and those relationships now continue with a firm that has that person's name on the door. As talent becomes more mobile in this profession as the, as the overhead of a large law firm and the brand and the reach of a large law firm become less necessary to certain kinds of practice. I mean, 20 years ago you may not have needed that specific slice of granite for the conference room table.
There might have been a few trappings, where we could have cut costs a little bit, but you needed the conference center, you needed the office and literal physical footprint in these places to make the practice happen. That's true today for all the obvious, largely technological reasons. So as that evolution continues and more and more people have this idea, we as Burford want to be positioned to partner with the best and brightest of those folks as they build those businesses. And so in whatever form that takes, Kindleworth is just a very obvious, partner for people as they're, as they're building and growing. And that is as entrepreneurs ourselves and as a business that is now firmly established, but still just quote unquote 17 years old, that's a mindset we share. And so when we can support that and be part of it, that's how we grow as well.
Stephen Rodney: That's very interesting. So I want to come back to Burford itself. What are the advantages and disadvantages of being public, publicly owned? I think in our pre-pod chat, we talked about, because I was a shareholder at that point particularly a moment when you got kind of picked on by someone in the market and your share price fell quite a lot because of that, not for any realistic reasons, just because someone came out and said some things. But, so that struck me as being pretty stressful if you're at an organization where that happens. But to tell us, in your words what the advantages and disadvantages of being publicly owned are.
Travis Lenkner [44:25] Well, we benefit significantly from the public platform, and I'll give you the, what to my mind are some of the leading reasons for that. First of all, we work with some of the largest companies and law firms around the world. Many of the companies themselves are public. And when they consider l - whether it's litigation, finance, or a more bespoke or interesting, legal risk management solution that would involve outside capital, there are a very, small number of organizations that they might choose to partner with. And our platform, our transparency as a result of our, the fact that we're publicly traded, you know, you can read all of our financials. You can see a lot about our portfolio. We are subject to every compliance regime, you know, in multiple jurisdictions, multiple market listings, all these things.
Stephen Rodney: That's an advantage, is it?
Travis Lenkner: It's important for us to remember that some days, but it is an advantage because the GC, the CFO, the CEO, or the managing partner of these organizations can see a whole lot about us where there are a lot of other firms, that operate in this space that are very opaque about where their capital comes from, how much they have, whether they even have any at a particular moment. whereas on a quarterly basis, I show you my balance sheet. It's a very different way to approach the market, but we benefit from, the access that it gives us to the types of organizations that would only enter into transactions like this with Burford. So that's number one. Number two is we're, because of the public nature and the real institutional platform, we're able to raise capital in ways that none of our competitors can.
We can tap the listed debt market. We just last month raised some capital, in an offering that was about 10 times oversubscribed. We raised $300 million in about 24 hours as part of a strategy to reduce some of the debt on our balance sheet. And that's something that we raised an amount in a day that it would take most other litigation finance providers the better part of a year to put together from various private capital sources. And so that speed allows us to be opportunistic to move quickly and to manage our capital stack in a way that really no one else in the industry can. And because we're not primarily a fund manager, we also have a lot more of the capacity to withstand challenges to the portfolio, particularly around duration, right? As litigation, unfortunately, is not only getting more expensive, but taking longer, if you are not publicly traded, but instead you are managing a private fund or a series of private funds, it's just like the PE issue we were discussing earlier.
That fund comes to the end of its life. Investors start saying, "Hey, you know, when is my capital coming back? How is this all going to resolve?" And it's now not just five or six, but eight or 10 years after that fund was raised, and there's some litigation matters in that pool of capital that still haven't resolved. All of that at Burford sits on a, in a single portfolio on our balance sheet where we can withstand the stresses of some of those duration extensions. We don't like them. We wish the system would move more quickly and more efficiently, but it is the fact that we are a balance sheet investor that allows us to do that.
Are there days when it presents other challenges? Of course. I mean, this is a lumpy business inherently, right? You were talking about some of the results that have been reported over the last few months. this is not just a factory line that's churning out, an output at a certain margin day in and day out.
It looks a lot more like this. And so I don't think this is a business that is fairly judged quarter by quarter. You have to zoom out, from that and take a look at the entire portfolio. But that is not to say that we don't want to be where we are, because the advantages far outweigh, the fact that we put out quarterly numbers and those are still going to be digested by the market. But the ability we have to operate in this space and with the counterparties we work with, there's really no one else in the world that can do what we do.
Stephen Rodney: And we've kind of touched on AI, but looking at AI, I'm interested in whether you guys are using AI to assess cases now in a way that you haven't previously, because it would seem to me that is an obvious use of AI because you can look at the history of these type cases and just get analysis, but I may be completely wrong.
Travis Lenkner: No, you're completely right. There still is a fundamentally human aspect to our underwriting process, and particularly, this is not a volume business. Our minimum investment size is usually somewhere around five million US, and our average investment size is much larger than that. And so, this is not something where we are feeding the documents into the machine, going to lunch, coming back, and making an investment decision. But we have, again, because of our long track record and size, the advantage of a whole lot of proprietary data. We have thousands of individual cases in our portfolio now that have resolved or are midstream or are in their early days. And the ability to mine those data for outcomes that we can then use to help us predict and think about what a new investment looks like, particularly around duration.
How long are these taking? Well, anecdotally, someone might say they're taking four years. On the basis of data, I can tell you all the ones Burford has ever been involved in are taking an average of 5.2 years and the trend is going in the wrong direction. So I want to think about that as I structure the terms of the investment and evaluate whether it's attractive for us. So there's absolutely a role for AI, and we've had, for several years now, an in-house, software development team at Burford helping us put together tools that we use every day to take advantage of both the internal proprietary data as well as everything that is out there now that can be gleaned from court dockets and some of the services and companies that extract information from them.
Stephen Rodney: I didn't realize enough, a friend of mine who, he may be listening, so I'll be careful. So I don't identify him. Talked to me about, he's in a US firm. Talked to me about how some of their trial lawyers, one who appears before the Supreme Court a lot, has used AI to analyze each judge, all their decisions to work out what questions to ask them in order to influence them. And apparently he said it is going very well, in looking at that. I found that quite interesting.
Travis Lenkner: One has to be careful, of course, right? The AI on the other side of the screen is never wrong in its own way of presenting information to you. And so, I do think we're trying, as so many people are, to do two very different things at the same time. Number one, to push usage of an experimentation with these tools always, all the time, every day, of course, within information security parameters and appropriately constructed spaces, but to push adoption, while at the same time saying, "Oh, but don't do that," right? And, don't forget it's very easy to be pulled into, "Thanks so much for that interesting question," says Claude, and then here is a lot of information. It's pretty easy to take that at face value, copy, paste, and move on.
That is not what even the designers of this technology would have us do. And so, extreme adoption and extreme caution at the same time and trying to find the midpoint of those two.
Stephen Rodney: That's fair enough. So we're moving towards the end of what's been a fascinating discussion, Travis. I'm interested in what still surprises you in your dealings with law firms in 2026?
Travis Lenkner: Well, I think inherent in a lot of the things we've been talking about is the speed or the relative lack of speed that, with which the legal profession has been corporatized or has adopted or been open to some pretty basic finance principles. And I've been doing something like this for about 15 years now, and it's surprising almost every day that I still find myself having a conversation with someone, and helping to teach them and bring them along about what is possible. That's not as surprising as when we're still overcoming resistance to some of those concepts. Law as I said before, is the last professional frontier. I think this has to be done carefully, prudently, practically, responsibly, within the ethical rules. I mean, I'm an officer of the court as well, right, and a member of the profession, so we at Burford take all that very seriously.
But it's still surprising to me that you have these global multi-billion dollar firms where it's still possible to find pockets that are not exactly being run like the businesses that they are. We will get there, but if you had asked me 10 or 15 years ago, I would have hoped that we'd be farther along by now. And that's surprising every day, but that's also the reason that we are here as Burford, and one of the great things that we get to do is to help show people what can be done that they might not have thought about before, and to, inject not only some capital, but some new ideas, into their profession.
Stephen Rodney: I have to say I agree with you, and I used to, particularly as a head hunter and even now as a coach sometimes, see what I could see a complete inefficiencies in law firms. And I think to myself, they're making pretty good money already. Just think what they could do if they actually ran themselves in an inverted commas 'proper business'. So, I kind of empathize with what you've said there. So just to finish with, and I'm not asking you again, and I appreciate you can't do this, but from what everything you said, it seems... Do you think in this time, let's say, in two years' time, there will have been a Silver Circle law firm which takes some form of equity investment?
Travis Lenkner: I think that's fairly likely. You gave me two years, not one. One, I think I would, I would hit a little bit, but I think at two, that's fairly likely. Partly because the market is so competitive and the competition is so fierce that I think there will be some firms that recognize an imperative to act, to change, to explore some of these ideas, lest they be quite truly left behind by other firms that they see winning the talent wars or winning the wars for market share in certain practice areas. So I don't know that I'd say yes to the one or two-year time horizon simply because of the sheer force of these amazing ideas. But I think the necessity for some firms of how are we going to not only grow, but stay where we are, I think that's going to cause some firms to have to get pretty real over the next two years, and I think there's a place for investor capital to help them manage those issues.
Stephen Rodney: Thanks, Travis. You've been a really excellent and interesting guest on, Beyond Billables, and, we're very grateful and glad you made the time to speak to us, so really thank you so much.
