Will Verbit Go Public in 2022?

Verbit’s constant attraction of investor money and recent acquisition of VITAC has set off a few optimistic waves in the media. Verbit bills itself as a unicorn, that is, a startup with a valuation of over $1 billion. Court reporters worried about that kind of classification should be aware that it means nothing. Fyre was set to be a unicorn, and yet Billy McFarland’s venture did little more than light Fyre’s investors’ money on fire and land him in jail. Theranos was valuated at $10 billion. It’s now worthless and Elizabeth Holmes may face jailtime. Powa was a unicorn with a valuation of $2 billion. That didn’t work out either.

I was shocked to come across an article that states that there are hopes of Verbit becoming a publicly-traded company by 2022. Ignoring things that the article gets incorrect, such as the firm being Manhattan-based (other articles state it’s an Israeli company), there are few reasons I can see for Verbit to become a publicly-traded company. Becoming publicly traded would allow investors to see the profit or loss. To give a great example, VIQ Solutions, parent of Net Transcripts, is publicly traded. It loses money every quarter despite reporting revenue in the millions. Companies that lose money aren’t attractive to investors and that’s why VIQ is about $7 a share today. Remaining private allows companies to continue a kind of “shell game” and operate despite being unprofitable. Based on Livne’s broadcasting of Verbit’s revenue and silence with regard to profit, I suspect Verbit would have the same exact problem, lots of revenue and little or no profit.

Going public would serve only one purpose in my view, an exit for current investors. Current investors could make a big deal about how it’s a company valuated at over $1 billion sitting “on top” of a market that’s allegedly worth $30 billion and watch as new investors dive in and take the bait. In the article above, Livne states the funding rounds were over-subscribed. That means they had a lot of money poured on them in their funding rounds that they did not need. If they’re over-funded, going public clearly wouldn’t provide the company with funds it needs — remember, it’s overfunded — again, it would give the current investors an exit. They get to cash out, some suckers get to buy in, and what happens after that is anybody’s guess. It remains a little strange to me that journalists buy the idea that a company that is maybe half a decade old has automatic speech recognition technology that is better than basically all the major players in the market. Those major players, according to one study, have accuracy levels between 25 and 80 percent.

My prediction is that Verbit will either fail to go public in 2022, or it will go public and take a hard fall sometime down the road after Livne and other investors have cashed out. I sincerely hope it’s the latter, because at least it would be a happy ending for the founder. Verbit finds itself in a precarious position of being a large target for the IRS. In the United States, one is a common law employee when the “employer” has direction and control. Verbit, according to the linked article, is using 30,000 freelancers to carry out its business model. If Verbit does not have direction and control, it cannot assure quality. If it does have direction and control, those are 30,000 employees it is failing to withhold taxes for. Like other companies that rely heavily on independent contractors, Verbit may soon find itself under attack from federal and state tax authorities where it conducts business or earns income. Anyone in the world can confidentially file a form 3949-A that puts Verbit under the spotlight, and that can only translate into headaches for the company and its investors. With that kind of exposure, I would not be investing in the company any time soon.

Even in a world where authorities turn a blind eye and there isn’t a decline in the company’s financial health, Verbit moving public could only give its competitors more information, which is something I’m looking forward to.

Meanwhile, back at Stenonymous HQ, an important meeting with my board of directors.

CART v Autocraption, A Strategic Overview For Captioners

With the news that Verbit has bought VITAC, there was some concern on steno social media. For a quick history on Verbit, it’s a company that claimed 99 percent accuracy in its series A funding. In its series B funding it was admitted that their technology would not replace the human. Succinctly, Verbit is a transcription company where its transcribers are assisted by machine learning voice recognition. Of course, this all has the side effect of demoralizing stenographers who sometimes think “wow, the technology really can do my job” because nobody has the time to be a walking encyclopedia.

But this idea that Verbit, a company started in 2016, figured out some super secret knowledge is not realistic. To put voice recognition into perspective, it’s estimated to be a market worth many billions of dollars. Microsoft is seeking to buy Nuance, the maker of Dragon, for about $20 billion. Microsoft has reportedly posted revenue over $40 billion and profit of over $15 billion. Verbit, by comparison, has raised “over $100 million” in investor money. It reports revenue in the millions and positive cash flow. Another company that reports revenue in the millions and positive cash flow? VIQ Solutions, parent of Net Transcripts. As described in a previous post, VIQ Solutions has reported millions in revenue and a positive cash flow since 2016. What’s missing? The income. Since 2016, the company hasn’t been profitable.

I might actually buy some stock, just in case.

Obviously, things can turn around, companies can go long periods of time without making a profit, bounce back, and be profitable. Companies can also go bankrupt and dissolve a la Circuit City or be restructured like JCPenney. The point is not to disparage companies on their financials, but to give stenographic captioners real perspective on the information they’re reading. So, when you see this blurb here, what comes to mind?

Critical Thinking 101

Hint. What’s not being mentioned? Profit. While this is not conclusive, the lack of any mention of profit tells me the cash flow and revenue is fine, but there are no big profits as of yet. Cash flow can come from many things, including investors, asset sales, and borrowing money. Most of us probably make in the ballpark of $50,000 to $100,000. Reading that a company raised $60 million, ostensibly to cut in on your job, can be pretty disheartening. Not so once you see that they’re a tiny fraction of the overall picture and that players far bigger than them have not taken your job despite working on the technology for decades.

Moreover, we have a consumer protection crisis on our hands. At least one study in 2020 showed that automatic speech recognition can be 25 to 80 percent accurate depending on who’s speaking. There are many caption advocates out there, such as Meryl Evans, trying to raise awareness on the importance of caption quality. The messaging is very clear: automatic captions are crap (autocraptions), they are often worse than having no captions, and a single wrong word can cause great confusion for someone relying on the captions. Just go see what people on Twitter are saying about #autocraptions. “#NoMoreCraptions. Thank you content creators that do not rely on them!”

Caring about captioning for people who need it makes your brand look good?
I wonder if a brand that looks good makes more money than one that doesn’t…

This isn’t something I’m making up. Anybody in any kind of captioning or transcription business agrees a human is required. Just check out Cielo24’s captioning guide and accuracy table.

Well, this is a little silly. Nobody advertises 60 percent accuracy. It just happens. Ask my boss.

If someone’s talking about an accuracy level of 95 percent or better, they’re talking about human-verified captions. If you, captioner, were not worried about Rev taking away your job with its alleged 50,000 transcribers, then you should not throw in the towel because of Verbit and its alleged 30,000 transcribers. We do not know how much of that is overlap. We do not know how much of that is “this transcriber transcribed for us once and is therefore part of our ‘team.'” We do not know how well transcription skills will fit into the fix-garbage-AI-transcription model. The low pay and mistreatment that comes with “working for” these types of companies is going to drive people away. Think of all the experiences you’ve had to get you to your skill level today. Would you have gotten there with lower compensation, or would you have simply moved on to something easier?

Verbit’s doing exceptionally well in its presentation. It makes claims that would cost quite a bit of time and/or money to disprove, and the results of any such investigation would be questioned by whoever it did not favor. It’s a very old game of making claims faster than they can be disproven and watching the fact checkers give you more press as they attempt to parse what’s true, partially true, and totally false. This doesn’t happen just in the captioning arena, it happens in legal reporting too.

$0/page. Remember what I said about no profit?
It doesn’t matter if they’re never profitable. It only matters that they can keep attracting investor money.

This seems like a terrifying list of capabilities. But, again, this is an old game. Watch how easy it is.

It took me 15 seconds to say six lies, one partial truth, and one actual truth. Many of you have known me for years. What was what? How long will it take you to figure out what was what? How long would it take you to prove to another person what’s true and what’s false? This is, in part, why it is easier for falsehoods to spread than the truth. This is why in court and in science, the person making a claim has to prove their claim. We have no such luxury in the business world. As an example, many years ago in the gaming industry Peter Molyneux got up on stage and demo’d Milo. He said it was real tech. Here was this dynamically interactive virtual boy who’d be able to understand gamers and their actions. We watched it with our own eyes. It was so cool. It was BS. It was very likely scripted. There was no such technology and there is no such technology today, over eleven years later. Do you think Peter, Microsoft, or anybody got in trouble for that? Nope. In fact, years later, he claimed “it was real, honest.”

Here’s the point: Legal reporters and captioners are going to be facing off with these claims for an indeterminate amount of time. These folks are going to be marketing to your clients hard. And I just showed you via the gaming industry that there are zero consequences for lying and that anything that is lied about can just be brushed up with another lie. There will be, more or less, two choices for every single one of you.

  1. Compete / Advocate. Start companies. Ally with deaf advocates.
  2. Watch it happen.

I have basically dedicated Stenonymous to providing facts, figures, and ways that stenographers can come out of the “sky is falling” mindset. But I’m one guy. I’m an official in New York. Science says there’s a good chance what we expect to happen will happen and that’s why I fight like hell to get all of you to expect us to win. That’s also why these companies repeat year after year that they’re going to automate away the jobs even when there’s zero merit or demand for an idea. You now see that companies can operate without making any profit, companies can lie, much bigger companies haven’t muscled in on your job, and that the giant Microsoft presumably looked at Verbit, looked at Nuance, and chose Nuance.

I’m not a neo-luddite. If the technology is that good, let it be that good. Let my job vanish. Fire me tomorrow. But facts are facts, and the fact is that tech sellers take the excellent work of brilliant programmers and say the tech is ready for prime time way before it is. They never bother to mention the drawbacks. Self-driving cars and trucks are on the way, don’t worry about whether it kills someone. Robots can do all these wonderful things, forget that injuries are up where they’re in heaviest use. Solar Roadways were going to solve the world’s energy problems but couldn’t generate any energy or be driven on. In our field, lives and important stakeholders are in danger. What happens when there’s a hurricane on the way and the AI captioning tells deaf people to drive towards danger?

Again, two choices, and I’m hoping stenographic captioners don’t watch it happen.

What Verbit Leadership Needs To Know

I had a lot of fun writing the Verbit investors article. But the more I explore opinions and ideas outside our steno social circles, the more I see that most people totally don’t get stenographers or the work we put in. A lot of us have had sleepless nights trying to get a daily out, time lost for ourselves or our families trying to do the job we signed up for, or some amount of stress from someone involved with the proceeding being unhelpful or antagonistic. It happens, we take it in stride, and we make the job look easy. So it doesn’t surprise me very much when people say “why not just record it?” It doesn’t surprise me that investors threw money into the idea that technology could disrupt the court reporting market. But I can only hope that proponents of digital really take the time to understand and step back from the cliff they’re being pushed towards.

For this exercise, we’re going to be exploring Verbit’s own materials. They recently circulated a graphic that showed the “penetration” of digital into the court reporting market. It shows 5 to 10 percent of the deposition market taken by digital, and 65 to 75 percent of the court market taken by digital. It also notes that only 25 to 35 percent of courts are digitally transcribed. I take this to mean that while they have 75 percent of the “court market,” they only transcribe about 25 percent of it. This is a massive problem. So the technology, when it’s not breaking down in the middle of court (29:20), is ready to record all these proceedings. But you only have the capacity to transcribe about a third of that. So in this magical world where suddenly you have every deposition, EUO, and court proceeding, where are you going to get all of these people? We’re talking about multiplying your current workforce by 28 assuming that every person you hire is as efficient as a stenographer. And the math shows that every stenographer is about as efficient as 2 to 6 transcribers. So we’re really talking about multiplying your current workforce by 56 to 168 times, or just creating larger backlogs than exist today. By not using stenographers, Verbit and digital proponents are setting themselves up for an epic headache.

Of course, this is met with, “well, there’s a stenographer shortage.” But what you have to understand is that we’ve known that for seven years now. All kinds of things have happened since then. You’ve got Project Steno, Open Steno, StenoKey, A to Z, Allison Hall reportedly getting over a dozen school programs going. Then you have lots of people just out there promoting or talking about the field through podcasts, TV, and other news. Showcasing the shortage and stenography has brought renewed interest in this field, and we are on track to solve this. Again, under the current plan, you would need as many as 60,000 transcribers just to fill our gap, and the turnover will probably be high because the plan promotes using a workforce that does not require a lot of training. So if you’re talking about training and retraining 60,000 people again and again over the next decade, I am quite sure you can find 10,000 or so people who want to be stenographic court reporters.

Look, I get it, nobody goes into business without being an optimist. But trying to upend a field with technology that doesn’t exist yet is just a frightening waste of investor money. How come when you sell ASR, it’s 99 percent accurate, but when Stanford studies the ASR from the largest companies in the world, it’s 60 to 80 percent accurate? How come when you sell digital it’s allegedly cheaper and better, but when it’s looked at objectively it’s more expensive and comes with “numerous gaps and missing testimony?” These are the burning questions you are faced with. There’s an objectively easier way of partnering with and hiring stenographers. If you don’t, you’re looking at filling a gap of 10,000 with 60,000 people, or multiplying the current transcription workforce of 50,000 by 56 (2.8 million). In a world of just numbers, this sounds great. Three million jobs? Who wouldn’t want that? But not far into this experiment you’ll find that people don’t grow on trees and the price of the labor will skyrocket unless you offshore all of the work. What happens when attorneys catch onto the fact that everything is being offshored and start challenging transcripts? Does anyone believe that someone in Manila is going to honor subpoenas from New York? Again, epic headache.

So if I could get just one message out to Verbit leadership and all the people begging for us to “just accept technology,” it would be to really re-examine your numbers and your tech. The people under you are going to tell you that a new breakthrough is just around the corner, that things are going well, and that you shouldn’t worry. But you should worry, because you very well might find yourself a pariah in your industry like Peter Molyneux ended up in his. If you’re not familiar, Peter became famous for promising without delivering. One of the most prominent examples of this was 2009 E3, where he stood up on stage and introduced Milo. This tech was going to be interactive. It was going to sense what you were doing and respond to it. It turns out it was heavily scripted, the technology did not and still does not exist to do what was being talked about and presented to consumers. Now, anyone with a bit of sense doesn’t listen to Peter.

If the ASR tech worked, why not sell it to us at 10,000 a pop multiplied by the 25,000 stenographers in your graphic and walk away with a cool 250 million dollars? It does what we do, right? So why aren’t we using it? Why aren’t you marketing it to us? It’s got to be a hell of a lot easier to convince 25,000 stenographers than it is to convince 1.3 million lawyers. Sooner or later, Legal Tech News and all the other news people are going to pick up on the fact that what you are selling is hype and hope. So, again, consider a change of direction. Stop propping up STTI, shoot some money over to the organizations that promote stenography, and partner up with steno. You’d be absolutely amazed how short people’s memories are when you’re not advocating for their jobs to be replaced with inferior tech. Take it from somebody who’s done the sleepless nights and endless hours in front of a monitor transcribing, this business isn’t easy. But if you trust stenographers, we’re going to keep making it look easy, and we’re going to make every pro-steno company a lot of money.