A $60M bet that automation with human oversight is a recipe for near-perfect speech-to-text
I’ve searched for a reliable way to autonomously transcribe natural speech for years. I’m a journalist, and I often have hours of taped interviews with sources around the globe to transcribe. For now, I’m still paying for people-powered transcription services.
Speech to text has been a huge challenge for AI developers, and it’s a puzzle that’s being closely watched in a variety of industries. The technology has implications far beyond quoting sources; human-machine interfaces in fields like robotics, autonomous vehicles, and personal computing will benefit from computers that can accurately interpret natural speech.
Transcription, then, is a kind of technological entry point, a straightforward market need that can help spur development of a technology that will have broad resonance and incalculable implications for how we interact with machines.
“Like nearly every market segment, the education, legal, and media and entertainment industries have had to quickly move to a remote environment,” says Jai Das, Managing Director and President at Sapphire Ventures. “As a result, the need for AI-driven, real-time and accurate transcription services has skyrocketed.”
The problem is natural contextual speech, along with accents and dialects, has made the quest for AI-driven transcription quixotic to date. So what do you do when there’s a ripe market for a technology but the capability just isn’t there yet?
Well, you improvise and use the tools at your disposal while pouring money into technology development.
That’s the strategy of an innovative transcription and captioning solution called Verbit, which utilizes an in-house, AI-based technology, along with an army of human overseers, to transform live and recorded video and audio into nearly perfect captions and transcripts for the higher education, legal, media, and enterprise industries.
“Verbit combines the speed and low cost of Automatic Speech Recognition technology with the accuracy of human transcription to solve this massive problem for companies and organizations in these markets,” says Das, whose venture firm recently led Verbit’s $60 million Series C. Total funding for Verbit now tops $100 million.
Verbit’s model uses cutting edge transcription technology technology, which filters out background noises and echoes and recognizes things like domain specific terms. The acoustic, linguistic, and contextual data is then thoroughly checked by Verbit’s human transcribers, who maintain quality assurance by editing and reviewing the material and incorporating customer-supplied notes, guidelines, and more. I’ve often been delighted when human transcribers I work with include little contextual notes about spellings and usage in their transcriptions.
I like this strategy a lot. Verbit can tap into a huge need among major enterprise players — namely, the need for real-time transcription — with a core technology that’s good but not yet perfect. The hybrid human-machine model enables the company to go to market with a high-quality product while continuing to invest in development. Despite dystopian nightmares of robots stealing jobs, that’s the way automation is going to infiltrate the enterprise in the foreseeable future: by joining forces with humans rather than displacing them outright.
According to a company statement, Verbit will use this latest investment round to further fuel its significant growth by continuing to innovate its data-driven product capabilities and increase the number of languages it supports.
Verbit Vies With Nuance Communications In $30B Transcription Market
Verbit, a Tel Aviv-based startup that uses AI to produce transcripts for legal and educational markets, is growing so fast that it could become a public company in the not too distant future.
It’s aiming at a $30 billion market that accounted for much of the revenue of Burlington, Mass.-based Nuance NUAN+0.8% Communications, a provider of speech recognition services, whose stock has popped 117% in the year ending February 12.
But last November, Nuance — which will retain a minority interest — announced that it was selling its medical transcription business. Meanwhile Nuance is seeing growth in moving its medical business to the cloud.
Should you buy Nuance stock? Could Nuance acquire Verbit or will it go public and grow as an independent company?
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Yet CEO since April 2018, Mark Benjamin’s enthusiasm about its growth opportunities and Nuance’s recent acquisition of Saykara, a service that automates clinical documentation, hint at faster growth ahead.
While acquiring Verbit could help Nuance grow faster, I doubt it will happen because Nuance is focusing on different vertical markets and Verbit CEO Tom Livne told me on February 9 that Verbit wants to go public and be the leader in its category.
Nuance’s Recent Results
Nuance says it enjoys “market leadership in conversational AI and ambient intelligence….90 percent of U.S. hospitals and 85 percent of the Fortune 100 companies worldwide” use its services.
Nuance reported a drop in revenues and earnings per share in its December 2020-ending quarter — which beat analysts’ expectations. Revenues fell 4.4% from $361.5 million to $345.8 million, according to the company, while earnings per diluted common share fell 71% from 17 cents to five cents.
This revenue decline was “primarily due to a non-strategic healthcare coding contract with the government that did not renew,” according to CFO Dan Tempesta’s comments in Nuance’s Q1 2021 Earnings Call Transcript.
Nuance’s declining revenue and EPS were better than analysts’ expectations. According to Zacks Equity Research, Nuance’s adjusted earnings per share of 20 cents were 11% more than the consensus while its revenues were 2.1% above the Zacks Consensus Estimate.
Nuance is divesting its medical transcription unit. In November 2020, it announced a deal to sell its “medical transcription and EHR go-live businesses” — which is expected to close during the current fiscal quarter. Nuance will maintain a minority interest in this business and include it in discontinued operations.
Before selling that business, over a fifth of Nuance’s employees provided transcription and editing services. According to its 2020 10K, as of September 30, 2020, 1,600 people — or 23% of its total full time employees — provided “transcription and editing services.”
Analysts’ Mixed Views On Nuance’s Prospects
Analysts expressed mixed views on Nuance’s prospects.
According to MarketBeat, research analysts at Oppenheimer cut their estimates for Nuance’s March-ending quarter by two cents a share to eight cents.
MarketBeat reported that other analysts were more optimistic. Specifically.
Wedbush boosted its price target from $45 to $65
Zacks Investment Research raised Nuance from a “sell” rating to a “hold”
SVB Leerink raised its price target by $1 to $55
As of February 11, the stock had an average rating of “Buy” and a consensus price target of $50.86, according to MarketBeat.
Nuance CEO’s Enthusiasm About Its Prospects
Nuance’s CEO is bullish on the company’s prospects.
In Nuance’s Enterprise unit, revenue increased 4% due to “particularly healthy performance in Intelligent Engagement with one of our strongest quarters ever for our security and biometrics solutions,” noted Benjamin.
Nuance expects single-digit revenue growth for the fiscal year ending September 2021. As Tempesta said, “We now expect total revenue in the range of $1.342 billion to $1.382 billion, up $15 million compared to our previous guidance range, implying organic growth of 5% to 8% year-over-year.”
Nuance did not change its 2021 earnings per share guidance. “Our full year EPS guidance remains unchanged at $0.71 to $0.77, despite the higher revenue expectations, due to accelerated R&D and sales investments, and an increase in our diluted share count to 318 million shares,” noted Tempesta.
Verbit’s Strategy, Performance and Prospects
Verbit — a purveyor of “the world’s leading AI-powered transcription and captioning platform” is providing transcription services for different vertical markets. Yet it is growing much faster than Nuance.
Having received over $100 million in funding since it opened for business in 2017, Verbit’s revenue run rate has grown five-fold since 2019. Aiming at the $30 billion transcription industry, Verbit has benefited from a shift to online learning and remote work since the pandemic began.
This shift has boosted demand for high quality, rapidly delivered digital transcription and captioning that make videos “easier to comprehend, more searchable, actionable, and accessible.”
Livne told me he started Tel Aviv-based Verbit because he needed a better way to produce transcripts of legal proceedings. “It was costing me over $100,000 to do legal transcripts and I was doing a lot of the editing myself. I looked for a better solution and could not find one. I wanted to be an entrepreneur and decided that [I would become one so I could solve this problem].”
It’s a big industry with many vertical markets. “The transcription industry has a $30 billion total addressable market that is flat to growing 2% to 3%. There are other vertical markets in education, medical, government, finance, and insurance. It is a really old fashioned industry where I was sure to bring innovation to the market.”
He started the company in 2017 and now has 143 employees. Livne said “We expect to cross $100 million in revenue in 2021. Employee growth has been rapid — from 12 in 2017 to 60 (2018) to 100 (2019). Verbit spent 2017 getting the product right and revenue ramped up in 2018 — from over $1 million, more than tripling in 2019, up five fold in 2020, and I expects the company to grow over five-fold in 2021.”
Verbit’s growth comes from “organic and inorganic” sources. As he said, “We are winning new customers due to our strong selling and marketing; we are expanding within our current customers through landing and expanding — our net dollar retention rate is 168% meaning our customers are buying more from us. We are acquiring mom and pop transcription services — giving them an exit and liquidity.”
Verbit says it does not face any public company competitors. “Nuance Communications does transcriptions but they have a health care focus and we aim at the legal and education verticals.”
Verbit wins customers by giving them what they want fast at a reasonable price. As Livne said, “We offer a good price, accuracy, rapid turnaround time, and scalability. We deliver on that value proposition due to our customer obsession, our excellent customer success people and our easy to use API. We also enable customers to tailor the service to their needs — for example, whether numbers are expressed in numerals or words.”
Verbit’s long term goal is to become a public company and to be a category leader. It plans to target new vertical markets and set specific strategies for each one. To that end, the company will need to “understand who in the organization makes the purchase decision, the time it takes to make the sale, the company’s ‘pain point,’ the right marketing message, and the average spending on the product per company.”
Verbit gets more efficient as it scales. “Our brand is more recognized as we grow which helps increase the number of sales made by each sales person and increase the number of accounts that each customer success person can manage increases from say, 50 to 70. As a result the accuracy of our transcripts improve and our gross margins increase,” Livne said.