BluShark Digital 0:00
Welcome to the SEO Insider with your host, Seth Price, founder of BluShark, taking you inside the world of legal marketing and all things digital.
Seth Price 0:11
Welcome, everyone. We are thrilled to be back. We have Dylan Ruga here with Steno, the founder and President as well as Chief Legal Officer. Welcome, Dylan.
Dylan Ruga 0:20
Thanks. Thanks for having me.
Seth Price 0:22
You know, look, for those that don’t know, Steno. It’s, you know, a court reporting service. That’s sort of like the, the what it does, but it’s a game changer in many ways. The time I heard about it, I thought this was genius. And I think it’s going to change the legal world for sure. Tell everybody what makes Steno special?
Dylan Ruga 0:42
Well, like you mentioned, Steno does court reporting, but we do it a little bit differently. So the first thing or kind of the biggest thing that differentiates us is that we will defer all of our payments until our clients cases resolved. And for me, as a practicing plaintiff’s lawyer, this is a huge thing that I struggled with when I started; my firm was managing cash flow. I was growing my firm from, you know, really just a couple cases to, you know, over 100 cases that we were litigating at any given time. And I felt pretty good about it, until I looked at my bank account and saw it was empty. And I figured, well, what’s happening here, and I was really advancing all these calls for my clients. And one of the biggest costs that I was advancing was for court reporting. And so I started looking around for a court reporting company that would defer its payments until my cases resolved. And I wasn’t able to find any that were willing to do that, for me, especially on a on a non recourse basis, meaning that if I lost my case, I didn’t want to have to pay a court order,
Seth Price 1:45
And that it buried the lead – deferring is awesome. But to me, you know, we’ve taken a couple big hits over the years. Right. And, you know, you got to try the big ones too you know, and when that happens, it’s really painful.
Dylan Ruga 1:57
Yeah, look, we’re all good at, or we’re think we’re pretty good at the intake process. And everybody that I talked to says, “Well, you know, that’s great, but I never lose a case.” And none of us like to think we ever lose cases. But if we’re being honest, and if we really try cases, there’s going to be, we’re gonna take some losses along the way. And that’s a tough pill to swallow when you’ve got to absorb, you know, could be six figures or more on cost that you’ve invested in a case.
Seth Price 2:19
No, I mean, it look so I, I get it, you know, you have one of the top venture first round of funds behind you, which is itself the same guys who, who launched Uber and a number of my friends, companies. So obviously, good people, other people have seen this and had the same idea I did, which is like, wow, you just decided to slice the bread. Some people eat it you know, they have their own credit lines, and they do it internally. I feel like one of the things that this has done is taken a percentage of that question off the table, in that not only is it deferred, but you know, if it goes sideways, you don’t need that, that rainy that rainy day piece. Give us an idea of first, how did it come to be, you talked about your need for it, but it’s great. Okay, so you couldn’t find it anywhere similar. I couldn’t find SEO done the way I liked that I started with BluShark. How did you come to say, Okay, I can’t find it. Started court reporting company, especially a venture backed one is a whole another step.
Dylan Ruga 3:31
Yeah. So I had the idea first, no, and started kind of grumbling to my friends that somebody ought to start an agency that does this. And some of my friends kind of just said, Well, you know, you should do it. And I chuckled and said, Yeah, with all my free time, because I just started my firm. But it was interesting to me. And so I thought, maybe I should reach out to a couple people that I am friends with who had previously started startups just to say, “Hey, what is, you know, what, what is your advice was the first step I should take and kind of exploring this.” And one of the people that I called is Greg Hong, Greg, previously started a company called Reserve, which was a competitor to OpenTable.
Seth Price 4:13
Dylan Ruga 4:15
I’m not sure if they were ever I Reserve. I think it was just Reserve.
Seth Price 4:19
Yeah, I thought he was part of possibly the late 90s Internet startup period.
Dylan Ruga 4:24
Yeah, around there, maybe a little bit later, but kind of.
Seth Price 4:26
I think I crashed one of his parties.
Dylan Ruga 4:30
So Greg, I got to know Greg, over the years because Reserve was sued for trademark infringement, and by another company that used the word Reserve and kind of the similar space. And when that happened, Reserve hired me to defend them in the trademark action. And so I got to know Greg, because he was the CEO at the time, and I defended his deposition. And when I came up with the idea for Steno, I picked up the phone and said, Hey, Greg, like, what do you think about this? And what would be some advice that you have for me. And he said, “Well, can you send me a model that you put together to me type of, you know, like financing model,” I said, “Sure.” I sent him a spreadsheet on a Friday. I didn’t know at the time that I had spoken to Greg that he was in the process of selling, Reserve, and was looking for his next gig. But the next Monday, he called me and said, I looked at the model all weekend, and I love the idea, I want to come out to LA and start the company with you. And I said, Great. And we’re off to the races. And so we were fortunate in that we were able to leverage Greg’s relationships with VC Firms, that from Reserve, and because he did a good job there and had a successful outcome at Reserve, they’re more than happy to talk to us about Steno, and back this, this company as well.
Seth Price 5:49
That’s awesome. You know, the Court Reporting Services, and again, it’s something that as a plaintiff’s lawyer, and as a defense lawyer, you know, or litigator, it’s sort of a necessary evil. And you know, you, you like your rep, and they’re nice to you. But I always get the impression that there’s a catchment of court reporters that are just contracting with whoever is out there, with how do you sort of talk to me a little bit about, you know, if you’re in the court reporter, if you’re in the lawyering game, and you have your favorite court reporters, can you, can you, you know, is it by choosing a Steno are these people still accessible? Or do most court reporting services have their own catchment of court reporters?
Dylan Ruga 6:39
Yeah, so every court reporter, pretty much across the country, and that’s a pretty broad statement, but it’s basically true as an independent contractor, and they all work with all of the reporting agencies in town. So we work with the same court reporters that our competitors work with. And so if a particular lawyer or firm has a relationship with court reporters, or videographers or interpreters that they enjoy working with, we’re more than happy to schedule those people on Steno’s jobs, and again, defer payment or do whatever else that you’re asking us to do.
Seth Price 7:14
And talk to me a little about the economics, right? Because obviously, it’s, there’s no free lunch, right? There has to be funding for it. How does it work? Walk me through the traditional sort of court reporting model, versus how Steno works from the point of view of the economics to the law firm?
Dylan Ruga 7:31
Sure. So Court Reporting, typically is charged on a per page basis, there’s other charges that get built in there, too. But the headline numbers, usually the page rate. And so if a normal sort of reporting job that’s done on net 30 terms, may cost $1,000, we’ll offer that to all of our clients, if you want to pay us on that 30, we’ll do it for you for $1,000 in this example. But if you want to defer payment on it, and not pay us until your case closes, we charge about a 30% premium. So that same deposition, instead of costing 1000 will cost 1300. And the way it works is when the deposition is over, we send an invoice and the invoice just says $1,300. And instead of saying pay us in 30 days, it says pay us when our case settles and that $1,300 remains constant, there’s no interest component or anything else that gets tacked on to it. So it doesn’t matter if it takes you three months or a few years to settle your case and get paid, you know that you owe us $1,300 for that particular deposition. And that way you can track your costs along the way. And so on our end, we refer to this as kind of micro litigation finance, because we are essentially financing this receivable for you. And on the back end, we have a debt facility that we borrow against on that invoice, which allows us to continue our operations and pay the court reporter right away. So the court reporters are paid within a day or within a day or two of turning on the transcript. So they’re paid out right away, we hold the paper. And, you know, we worry about collecting later.
Seth Price 9:15
And I assume built to that profit as well as a write off percentage for some percentage of cases that lose a trial, presumably or…
Dylan Ruga 9:22
That’s right, we historically we’ve seen about a 5% loss rate. You know, we’ve modeled it into our financial model, a number higher than that. So at this point, five percent loss rate is well within kind of what we expected to see and it works fine for business.
Seth Price 9:39
That’s awesome. question I got asked when we heard I was gonna be interviewing you. I thought I’d pass along. What happens if a case goes up on appeal?
Dylan Ruga 9:47
There’s a simple answer to any kind of question like this is we only get paid when you get paid. So if it goes up on appeal and takes two years or three years or whatever it is, and you don’t get paid until after that, and then we’re waiting to get paid. At that point, if your client drops you, and you put a lien on the case, and you eventually get paid back your costs, then we expect to get paid when you get paid. If a client drops you and you don’t assert a lien, for whatever reason, then we’d write that off as a loss. And so the short answer is we get paid when you give it,
Seth Price 10:22
It seems like in a way that you borrow a little bit from the title insurance model. You know, a bail bond, similarly, where somebody’s writing, you’re essentially writing and I assume, like anything else, if somebody loses all their cases, that’s probably not an ideal client for you. But if you’re within the standard deviation, it’s, it’s an awesome win win.
Dylan Ruga 10:43
That’s right. I mean, like anything, there’s a bell curve, you know, in terms of, you know, how good firms are, and how many cases are going to win, how many cases they’re going to lose, and how long cases take to resolve over time. But again, we’ve built in certain assumptions around the loss rate. And, and so far, we’ve been doing this for just over three years, and we’re seeing numbers that are about within that expected loss rate.
Seth Price 11:06
What have you learned? There’s an amazing amount of data you must have seen. You know, there’s, you know, when you’re on a plaintiffs listserv, you see the celebrations, right, you see the the big wins. And in, at least in my market, I know that a number of these huge wins that are incredible, very often come down to earth later on, or before the actual email was sent. Wanted to see like, what are some of the things that you may not have realized, being a rock star, you’re part of people… you’re part of the Glitterati, West Coast trial lawyer world. But what have you learned, you know, sort of like, again, even in that world, a lot of bravado, a lot of testosterone, a lot of badass women and men trying cases. But have you seen stuff where you’re like, “Well, I didn’t know this before I was, you know, on the other side?”
Dylan Ruga 11:58
Well, everybody talks about kind of that outlier big number results. And what they don’t talk about are the cases that they lose at trial, or the cases that for one reason or another, they, you know, expect a seven eight figure outcome and they receive a five figure outcome. And you know, I see that way more often than I thought that I would see that, you know, again, most people don’t talk about the losses, most people don’t talk about the cases where, you know, some evidence shows up during the course of litigation that they weren’t expecting. And now their case value plummets, 90%. But it happens more often than you think. And, you know, we see it a lot in our business as a standard. But thankfully, most of our clients who take on litigation matters, even though they may not get the amount of money that they were hoping to get out of the case, almost always get something out of the case, which is enough to pay their costs and puts money in a client’s pocket and puts somebody in the firm’s complex as well.
Seth Price 12:56
Well, it’s funny, I equate it almost to a visit to Vega., I have a lot of friends who play the electronic games, whether it be slots or their names, and they love it, and I see the winnings on Facebook, I’m with them when they when they win great amounts of money, and people are, you know, pulling cash out. But these casinos are not built on people. You know, over time, there’s there’s a truism that’s going to have to happen. And I assume, you know, just like, you know, it’s not like people are taking eight figure cases and turning them into nothing, many of those cases, but you know, a couple bad facts may bring them down to Earth along the way. Anything else? As far as, you know, stuff I’ve seen from the perspective of a marketing agency looking under the hood of a lot of firms, that the cashflow is so incredibly tight and the swings can be so dramatic. I assume in one sense, they love you because you’re providing part of the answer for them. Are there other things about law firm management that you have gleaned? I mean, you have a boutique practice for, you know, to stereotype it? You know, are you seeing stuff that, you know, reasons that you know, things like sort of any caution, not cautionary tales, but any lessons learned looking at large firms having bigger swings, do small firms, anything that you’ve picked up looking at just crowdsourcing the numbers that you get to see.
Dylan Ruga 14:24
No, we don’t have that much visibility into our clients’ overall firm financial picture, so I don’t want to overstate the data that we have there. What we do have is a lot of deposition transcripts, we have 1000s upon 1000s of deposition transcripts. And so one of the things that we’re thinking about doing is culling those transcripts to see what patterns can be taken out of those transcripts by matching the the transcripts to the ultimate case outcomes which we’re privy to most of the time. And figure out what we can learn from the deposition transcripts themselves, and then the case outcome and see if we can find anything in there that you know what, whether it’s asking questions in a particular way or using a particular cadence or whether on the flip side, if it’s a defense outcome, whether there are particularly objections or things that defense lawyers are saying or doing in depositions, that may give them a leg up in the litigation process.
Seth Price 15:24
No, I love that every once in a while I get pitched by new companies. And there was one that came with AI, and they were trying to use that to be able to value cases for lending purposes. But I thought it was ahead of its time, and I think it was and they’ve pivoted to other work. But what I love here is the idea that, you know, the the idea of AI is, you know, from a sample of one, you can’t get much, but if you could take every case that hits it out of the park, and every case that doesn’t, you know, the two extremes and looking for commonalities, it’d be, it’d be kind of cool, just as a as one of those internal red flags. Imagine if you could send your clients, you know, we’ve we’ve sent a bot through your transcripts. And based on these pieces, you should be wary that you’re in this, you’re statistically significant to either have a negative outcome or a positive outcome based on what you’re, what you’re seeing. That’s kind of a cool future ahead.
Dylan Ruga 16:20
Yeah, I think so. And another thing that we’ve kind of talked about doing at Steno, which, you know, we’re not planning on doing in the short term, but maybe a longer term, is assigning some type of credit scores to law firms based on the number of cases that they take that have good good outcomes versus bad outcomes. And like you were saying before, I mean, there’s a bell curve of, you know, firms out there in terms of how good they are, how likely they are to sign on, you know, winning cases. And so we have a pretty good history of working with firms over a long period of time, we can start to look at individual firms and say, you know, this firm has a better credit risk than that firm, and
Seth Price 17:07
Look, you won’t say it, but I mean, to me, I wouldn’t be surprised if version 2.0, that that credit score, whatever you want to call it, might affect pricing, and which sort of in one sense would want to right, if you’re a firm that really loses 1% of the time, versus a firm that’s taking huge risks and losing 10% of the time, at some point that I’m sure will get baked into a pricing metric.
Dylan Ruga 17:33
Yeah, that’s something we’ve talked about, but had no plans to implement.
Seth Price 17:36
Right? I’m just saying like, you can see the future of it. Are people are people nipping at your heels? Are you seeing invitations are the most sincere form of flattery? Are you seeing it out there? What are you seeing right now?
Dylan Ruga 17:47
Yeah, we’ve seen it. We haven’t seen it done as well. The reason why is that wha,t what I think makes Steno unique is that we combine the service that we’re offering, which is the court reporting with the litigation finance, by packaging it in one invoice that kind of just goes naturally into your workflow at your firm, you don’t really have to do anything differently at your firm. What we’ve seen other companies try to do is take a court reporting agency, and then basically duct tape onto it a litigation finance company, and have those two companies work together to try to deliver to you what Steno is doing in an integrated, streamlined way. And the experience for the lawyers just isn’t as good because now you’re dealing with two different companies and, and they don’t really know how to defer payment. And this type of way. I expect that we’ll see some of the bigger box court reporting agencies out there try to get into this model more – I’ve spoken with some of them. And I’ve heard that they like our model, and that they would like to start doing it down the road. It’s just that some of the bigger court reporting agencies are owned by private equity companies, and they have a different kind of risk tolerance than the venture capital companies that are backing up.
Seth Price 19:13
That’s awesome. Look, it sounds like your world is exploding. And I want to let you get back to changing the world because really, really impressed by everything. Any final words for our audience?
Dylan Ruga 19:24
No thanks. Thanks for having me. Seth. It was great chatting with you and anything Steno can do to help. I’m always around people can reach me just dylanesque.com.
Seth Price 19:32
We’ll look forward to watching your meteoric rise. It’s really cool when somebody does something and you’re like, Yeah, that makes so much sense. So thank you so much for being here, and we’ll catch up soon.
BluShark Digital 19:43
Thank you for tuning in to the SEO Insider with Seth Price. Be sure to check back next week for fresh insights into building your brand’s online presence. Episodes are available to stream directly on BluShark Digital’s website.