It takes 27 months for a case to get to trial on average after the initial lawsuit filing. A settlement offer can take between 18 months and 2 years. This creates a cash flow crunch for attorneys that work on a contingency basis. Steno is a platform that provides an array of legal service support solutions including financing and remote technologies for law firms. The company’s signature product, DelayPay, allows firms to defer their administrative court reporting and case costs until there is a resolution in the case. This allows attorneys to provide better service and outcomes for their clients without having to undergo the arduous process associated with traditional litigation finance. During the pandemic, the company introduced Steno Connect, a remote deposition technology that allowed cases to continue during lockdowns, avoiding costly delays.
LA TechWatch caught up with Steno CEO Greg Hong to learn more about the business, the company’s strategic plans, latest round of funding, which brings the company’s total equity funding to $40.5M, and much, much more…
Who were your investors and how much did you raise?
We raised a $15M Series B round led by Left Lane Capital, alongside other private investors and a strategic investment from Clio Ventures.
Tell us about your product or service.
Steno combines litigation support services, purpose-built technology, and flexible payment terms under one single umbrella for law firms. When a lawyer books a court reporter for a deposition or files documents with the court, they are often working with antiquated systems and paying out of pocket, creating an administrative and financial hurdle to access the basic services they need to fight for their clients.
When a lawyer working on contingency works up a case, they rack up thousands of dollars in case costs that are tied up until there’s a disbursement in the case, which is typically somewhere between 1-2 years. Steno’s flagship product, DelayPay, is the first product on the market that allows law firms to defer those case costs until disbursement, freeing up valuable cash flow for them to grow their business and enabling them to build stronger cases on behalf of their clients without going through lengthy underwriting processes for traditional litigation finance.
We also deliver those services using technology we built in-house from scratch. Our clients have access to a purpose-built dashboard, giving them 24/7 access to their case files, billing information, booking requests, and more. Steno is integrated with Litify, the practice management platform, so that attorneys and paralegals can request services directly within their existing workflow. We’ll soon integrate with our new strategic partner and legal tech platform, Clio, to do the same. I’m really excited about this partnership as we build through the back half of 2023.
What inspired the start of Steno?
My cofounder and Steno’s President, Dylan Ruga, is a practicing attorney in Los Angeles and came to me with the initial idea for DelayPay. He was looking for a court reporting agency that would defer costs until his cases resolved, but nobody in the market was offering a way to solve the issue preventing him from growing his firm. I saw an opportunity there to not only help attorneys with their cash flow problem but to deliver these services in a transformative way. I called up my now-cofounder and CTO, Dan Anderson, to pitch him the idea, and the three of us founded Steno a few months later.
How is it different?
Steno is the only court reporting agency broadly offering deferred, non-recourse payment options to law firms. This is a game-changer for plaintiff attorneys; we take on their cash flow problem, and they can use that extra cash to build their firms and take all the depositions they need to win their case without weighing its impact on near-term cash. We’ve heard from clients about how meaningfully it has changed their practice by giving them more firepower to litigate their case and to grow their businesses. That feedback is really validating that we’re onto something with impact here.
We are also built on a state-of-the-art technology infrastructure that gives our clients an unparalleled experience. We built it from the ground up to solve bespoke problems, and it’s allowed us to integrate into law firms’ existing workflows, cut our response times from hours or days to minutes, empower our clients with the tools they’ve been itching for, and offer our providers a centralized and intuitive experience as well.
What market you are targeting and how big is it?
For this year, we’re focusing on expanding our court reporting, service of process, and e-filing services to major markets across the US, but our ultimate vision is to build the service layer for law firms; a one-stop-shop for all of the services that attorneys spend $17B annually on to run their law firms that don’t involve practicing law.
What’s your business model?
We are a tech-enabled services company with elements of a managed marketplace. We handle the actuarial calculations of carrying the costs until our clients’ cases settle so that what they see on their rate card is what they get, with no financing fees or underwriting processes. The price is the same whether their case settles next week or 2 years from now.
How are you preparing for a potential economic slowdown?
Legal support services are remarkably resilient to macroeconomic drivers, and we are lucky in that respect. Whether we’re in an economic boom or recession, depositions need to be taken, documents need to be filed, and law firms need cash.
With that said, these new funds will allow us to put our foot on the gas and grow boldly when we’d otherwise temper our approach amid the choppy capital markets.
What was the funding process like? What are the biggest challenges that you faced while raising capital?
It’s a difficult fundraising environment right now and certainly a different animal than our Series A in 2020, but the capital is out there for solid businesses with high upside potential. Investors have a lot of dry powder but are looking for validation of a business’s strength now more than ever. We had confidence in pitching our business because we’re stable and growing, and as a result, we found the right partner in Left Lane Capital.
It’s a difficult fundraising environment right now and certainly a different animal than our Series A in 2020, but the capital is out there for solid businesses with high upside potential. Investors have a lot of dry powder but are looking for validation of a business’s strength now more than ever. We had confidence in pitching our business because we’re stable and growing, and as a result, we found the right partner in Left Lane Capital.
What factors about your business led your investors to write the check?
Our partners at Left Lane Capital ultimately recognized we have a growing, thriving business driven by strong product-market fit and a team in place to take us to the next level. Their diligence process and analysis are second to none, and have been fantastic partners from initial pitch all the way through funding as champions of our business.
What are the milestones you plan to achieve in the next six months?
By the end of the year, we’re planning to instrument and optimize our go-to-market motion and formally bring our services to new major metros. We’re also expanding our tech team to build some incredible new differentiating products that we’ll be bringing to market in Q3 and Q4, including an integration with our strategic partner, Clio. It’ll be a busy H2 for Steno.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
It’s critical to build in levers to keep a business nimble. During the raise, we had conviction that a fresh injection would carry us into a new phase of growth, but we were also confident that we could run our business just fine without it. With or without an injection of capital, it’s imperative to have strong product-market fit and to build the right levers to lean in or pull back as needed.
Where do you see the company going now over the near term?
We’ll have a growing presence in new major metro areas across the country and we’re working on deploying products that directly solve lawyers’ problems. We’re also scaling up our concierge-style service of process and e-filing services. The funding has enabled us to really turn up the heat, and I couldn’t be more energized about it.
What is your favorite restaurant in LA?
If I have a special occasion to celebrate and can snag a reservation, you’ll find me at Nobu every time!
