Steno raises $3.5 million led by First Round to become an extension of law offices

Published August 28, 2020

The global legal services industry was worth $849 billion in 2017 and is expected to become a trillion-dollar industry by the end of next year. Little wonder that Steno, an LA-based startup, wants a piece.

Like most legal services outfits, what it offers are ways for law practices to run more smoothly, including in a world where fewer people are meeting in conference rooms and courthouses and operating instead from disparate locations.

Steno first launched with an offering that centers on court reporting. It lines up court reporters, as well as pays them, removing both potential headaches from lawyers’ to-do lists.

More recently, the startup has added offerings like a remote deposition videoconferencing platform that it insists is not only secure but can manage exhibit handling and other details in ways meant to meet specific legal needs.

It also, very notably, has a lending product that enables lawyers to take depositions without paying until a case is resolved, which can take a year or two. The idea is to free attorneys’ financial resources — including so they can take on other clients — until there’s a payout. Of course, the product is also a potentially lucrative one for Steno, as are most lending products.

We talked earlier this week with the company, which just closed on a $3.5 million seed round led by First Round Capital (it has now raised $5 million altogether).

Unsurprisingly, one of its founders is a lawyer named Dylan Ruga who works as a trial attorney at an LA-based law group and knows first-hand the biggest pain points for his peers.

More surprising is his co-founder, Gregory Hong, who previously co-founded the restaurant reservation platform Reserve, which was acquired by Resy, which was acquired by American Express. How did Hong make the leap from one industry to a seemingly very different one?

Hong says he might not have gravitated to the idea if not for Ruga, who was Resy’s trademark attorney and who happened to send Hong the pitch behind Steno to get Hong’s advice. He looked it over as a favor, then he asked to get involved. “I just thought, ‘This is a unique and interesting opportunity,’ and said, ‘Dylan, let me run this.’ ”

Today the 19-month-old startup has 20 full-time employees and another 10 part-time staffers. One major accelerant to the business has been the pandemic, suggests Hong. Turns out tech-enabled legal support services become even more attractive when lawyers and everyone else in the ecosystem is socially distancing.

Hong suggests that Steno’s idea to marry its services with financing is gaining adherents, too, including amid law groups like JML Law and Simon Law Group, both of which focus largely on personal injury cases.

Indeed, Steno charges — and provides financing — on a per-transaction basis right now, even while its revenue is “somewhat recurring,” in that its customers constantly have court cases.

Still, a subscription product is being considered, says Hong. So are other uses for its videoconferencing platform. In the meantime, says Hong, Steno’s tech is “built very well” for legal services, and that’s where it plans to remain focused.

Atrium raises $65M from a16z to replace lawyers with machine learning

Published September 10, 2018

Let the computers do the legal busy work so attorneys can focus on complex problem solving for their clients. That’s the lucrative idea behind Atrium LTS, Twitch co-founder Justin Kan’s machine learning startup that digitizes legal documents and builds applications on top to speed up fundraising, commercial contracts, equity distribution and employment issues. For example, one of its apps automatically turns startup funding documents into Excel cap tables.

Automating expensive legal labor has led to a rapid rise to 110 employees and 250 clients for Atrium, including startups like Bird and MessageBird. Atrium only came of stealth a year ago with a $10.5 million party round before going into Y Combinator last winter. Today it announces it’s raised a $65 million round led by Andreessen Horowitz.

In characteristic dude fashion, Kan tells me “I’m pretty stoked about that because of having more resources for Atrium.” The venture firm’s partner Andrew Chen is taking a board seat and famed co-founder Marc Andreessen is joining as a board observer. “I wanted a visionary who’s always going to be pushing us to build something really big,” Kan says. General Catalyst, YC’s Continuity Fund and Ashton Kutcher’s Sound Ventures are also joining the round.

With the massive influx of cash, Atrium will be able to develop more internal tools it can use to crank out client work faster than its traditional competitors. “We can ultimately be this platform on top of which you’re building these legal businesses and eventually other professional services and software services,” Kan explains.”They’re all sitting on top of the platform that understands legal documents.”

In more Atrium news, Y Combinator’s leading partner Michael Seibel will join the startup’s board, too. And it’s acquired Tetra, a YC artificial intelligence startup that had raised $1.5 million to analyze voice, “to help us build our platform that understands and structures data,” Kan tells me.

What Kan didn’t initially mention is that two of Atrium’s co-founders, CTO Chris Smoak and legal partner BeBe Chueh, have left. He later admitted they had transitioned out of the company several months before the new funding. “BeBe wanted to spend time working on family (she just got engaged); Chris and I disagreed on his job role” regarding the definition of the CTO position, Kan tells me. He’ll now be running Atrium with remaining co-founder Augie Rakow, formerly of mega-law firm Orrick, and Kan’s long-term business partner and former McKinsey analyst Nick Cortes.

Justin Kan (Atrium) at TechCrunch Disrupt SF 2017

The law firm business model has left the door open for disruption by technology companies like Atrium. “Law firms generate revenue from hourly billing, and lack an incentive to vastly improve efficiency,” Chen writes. “Many law firms dividend out all their profits at the end of each year, making it hard to invest in the expensive investment of building software. Software is hard to build inside a software company, much less a law firm.”

But Atrium is an engineering company with a legal clientele. It takes the most common and time-consuming activities — often related to ingesting mountains of documents — and builds machine learning workarounds. Atrium’s lawyers can focus on advising their clients on what to do, rather than burning the midnight oil doing it as they look for tiny quirks in the paperwork. The legal services get faster, cheaper and more predictable, so Atrium can offer upfront pricing. It’s been using fundraising workshops and other educational materials to drum up leads.

Here’s what you’ll learn at Atrium’s fundraising workshop

For now, Atrium’s tech is limited to a narrow band of use cases. But “over $300 billion is spent per year in the enterprise legal market,” Chen writes, so there’s plenty of room to grow now that Atrium is well capitalized. It will have to convince big corporations to ditch the old way and let computers lend a hand. Luckily, Atrium isn’t a SAAS company forcing clients to use the tech themselves. Done right, they shouldn’t even know that it’s machine vision software, not junior associates, pouring over their docs. It will have to out-match fellow legal tech startups like Ravel, CaseText, Judicata, Premonition and more, though they’re often just tools rather than software-equipped law firms.

Kan also cops to his lack of experience in legal. “I think for any full stack vertical startup started by a non-subject matter expert (i.e. me who is not a lawyer), there is a risk that you come in and are very prescriptive on how things work. Then you build software that says ‘the providers must do it this way!’,” Kan tells me. “But the practical reality is that it doesn’t work with the nuanced, non-linear workflows that providers already have. So the technology doesn’t get adopted and fails to provide value. That to me is the biggest upcoming risk.”

Justin Kan, from lifevlogger to legal giant

Yet if Atrium can ease clients into this new world service by service, it could generate network effects that fuel the whole business. It’s just a matter of prioritization. “One of the things I always need to be focused on is…focusing. That’s sometimes a blind spot.” From Justin.tv to Twitch to its acquisition by Amazon to his role as YC partner, Kan delivers, but can be frenetic. “As an entrepreneur, I have a tendency to take on too much.”

But after leaving YC because “I had felt like I’d stopped learning,” Kan has found the legal space so full of knowledge and opportunity that it can hold his attention. “Part of why I like this business is because it was so different. I didn’t think it was something that would be as easily competed with,” Kan recalls. “I had this calendar company and Google came out with something similar. I told [Twitch co-founder] Emmett ‘We have to do something no one can compete with. At least Google will never do this.’ Then they did.”

But unlike with that game streaming startup, Atrium doesn’t have to worry about beating or getting bought by some legal tech giant. Instead, it wants to become one.