This startup wants to help small businesses survive expensive lawsuits by funding them

Not every person or business can brush aside a multimillion dollar lawsuit — but for those that can afford to fight, a winning case can mean a profitable outcome.

That's what Legalist, a startup in Y Combinator's Summer 2016 class, is banking on by offering funding to companies in litigation battles. For example, the startup has invested $75,000 for one lawsuit and said it expects to receive $1 million in the outcome.

"It's a niche field that you don't really think about," cofounder Eva Shang said during its the accelerator's Demo Day on Tuesday, according to Business Insider.

However, litigation funding did receive mainstream media attention this year after a Forbes report revealed Silicon Valley tech investor Peter Thiel had been backing Hulk Hogan's lawsuit against Gawker Media.

Thiel's act, while called "dangerous" and "petty," was not illegal. In fact, it's an industry valued at $3 billion, Shang said.

Legalist plans to offer between $50,000 and $500,000 to lawsuits and will take up to 50 percent of the settlement, Business Insider reported.

Unlike Thiel picking cases to exact revenge, Legalist is taking a big data approach. The startup is calculating the risk of litigation funding by gathering data on lawsuits dating back to 1989. An algorithm assesses the risk on 58 variables -- judge, lawyer, court type -- related to the outcome, according to TechCrunch.

That algorithmic approach stems from the startup's original goal. Shang and her cofounder Christian Haigh, both undergraduates at Harvard, were building a database and analytics service for lawyers. An earlier TechCrunch report dubbed Legalist, "Google for state court records."

In July, the startup was scraping county and state court records from 10 different states and accumulating about 400,000 new documents daily.

Licensed attorneys could search through these records and also receive email updates on flagged cases. Legalist planned to charge lawyers for additional features that could help them determine litigation strategies.

Now, the startup is acting as a financing firm for litigations it identifies as potentially lucrative in its own system. While the company was previously servicing lawyers, Shang pitched her startup Tuesday as helping small businesses in need.

Interestingly, Shang is a Peter Thiel fellow, meaning she is one of 29 people this year who took a break from college and received $100,000 to pursue her startup this year.

But for Legalist, its future clientele and mission is “not Peter Thiel funding Hulk Hogan,” Shang said.