A Brainy Headset for Clearer Sound

In the late 1990s, starting a new Internet company with a healthy bucket of venture capital seemed de rigeur for engineering undergraduates at Stanford University. Well, most of them. While many of their classmates were out conquering the Internet, Alex Asseily and Hosain Rahman were trying to build the perfect mobile-phone headset.

Their friends, needless to say, were unimpressed. "Some of them were selling companies for hundreds of millions of dollars," Asseily says. "They said to us, 'Don't mobile phones already work? I mean, you talk and people hear you, right?'"

Give the contrarians their due: Asseily and Rahman saw a market few did and weren't fooled by the dot-com carnival. They believed that early mobile tech successes like the first Palm (PLMO) personal digital assistant and Nokia (NOK) cell phones with big screens and loads of features could lead to something more than just a cool gadget. So in 1999, they started a company called Aliph and set out on their mobile adventure.

"THE HARD CALLS." Running in a different direction than the pack is starting to pay off. Asseily, 29, and Rahman, 28, just shipped their first product. Called Jawbone, their $150 headset combines snazzy looks with cutting-edge technology (see BW, 10/18/04, "Space-Age Sound Comes Down To Earth"). Everyone who buys a cell phone is a potential customer. Market leader Plantronics (PLT), for example, topped $416 million in sales in fiscal 2004.

Aliph's secret sauce? Technology designed for the military that uses sensors to spot bone vibrations created by someone talking. Jawbone combines that data with surrounding sound levels, gathered 500 times per second, and automatically adjusts the conversation's frequency and volume characteristics. The device has won several product awards, including a best-in-class citation at a prestigious mobile computing conference, and is quickly garnering other critical acclaim, such as a silver in the 2004 BusinessWeek-sponsored Industrial Design Excellence Awards.

"They are very creative. They seem to be able to make the hard calls," says B.T. Khuri-Yakub, an engineering professor at Stanford and early investor in Aliph. "If something isn't working, they're not afraid of tackling that. They definitely have a lot of attributes you look for in somebody trying to make a startup happen," he says.

PAYLESS DAYS. Plenty of investors have noticed. Over five years the duo has raised $7.5 million from the likes of Mayfield Ventures and $1 million from their own families. They built a strong technology portfolio and recruited audio experts from famed research centers like Lawrence Livermore National Laboratories.

That money has seen Asseily and Rahman through some tough development years. They nearly went out of business during the dot-com crash and during one stretch couldn't scratch up enough cash to even build a prototype. As the CEO of the Brisbane (Calif.) company, Asseily cut his and Rahman's salary to zero to ensure that his 17-person staff would get paid on time.

Nonetheless, they persevered. It may soon be payoff time for Asseily and Rahman, two guys who didn't even like each other very much when the first met on the rugby pitch at Stanford. "We kept arguing about which side of the scrum we wanted to be on," says Asseily.

"CULTURAL ROOTS." But their similar backgrounds helped them forge a longtime friendship. Asseily grew up in Britain and spent a significant chunk of time in Lebanon, where his family's business is located. Rahman's parents are Pakistani immigrants who run an oil-services consulting company in Los Angeles. But he spent many months of his youth back in Pakistan visiting family.

"We are in California, but our cultural roots were elsewhere," says Rahman. In a nod to their shared heritage, they named their company after the first character of the Arabic alphabet.

Both also combined engineering minds with artistic streaks. Asseily originally planned to study fine arts with an emphasis on sculpture at Stanford before listening to his father's advice that he concentrate on something more pragmatic. Rahman had actually applied and been accepted to the California Institute of Fine Arts, a prestigious arts college in Pasadena near his home, before changing his mind and heading to Palo Alto.

TAG-TEAM APPROACH. Like Apple (AAPL) impresario Steven Jobs, they're channeling their love of art into technology. The sleek Jawbone is Apple-esque in its simplicity, with white plastic molding and matte-metal finishes.

They've also learned to split their tasks at the young company. Asseily is the visionary, while Rahman is the businessMan. "Hosein is more outward facing, and he plays those roles better than I do," says Asseily. Their tag-team approach has yielded what tech experts say is one cool product.

Wonder if they're asking their faux millionaire classmates, "Can you hear me now?" By Alex Salkever, Technology editor for BusinessWeek Online

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