- The speaker discusses the early days of their company and the challenges they faced
- They were inspired by Palm and Nokia to create a voice interaction layer for mobile devices
- They struggled to raise money initially but eventually invented noise cancellation technology
- Handset manufacturers were hesitant to integrate their technology due to cost concerns
- They received funding from DARPA to develop their noise cancellation algorithms for battlefield technology
- The speaker emphasizes the importance of staying the course and believing in their vision
- They faced difficulty raising money during a downturn in the technology industry
- They decided to create their own hardware device instead of licensing their technology
- The speaker had a background in mechanical engineering and electrical engineering, which helped them in their hardware development journey.

- The speaker and their team raised capital to build a hardware device, which was a risky move at the time.
- They faced challenges in convincing people that they knew how to successfully build and scale a consumer hardware product.
- They learned the importance of design and the intersection of technology and design from Apple's success with the iPod.
- The speaker had a meeting with Steve Jobs, who gave brutally honest feedback and made them realize they had compromised on important aspects of their product.
- They launched their first consumer product, but it had numerous problems and did not sell well.
- The company was shut down by investors, but the speaker and their co-founder still believed in their mission and wrestled back control.
- They focused on learning from their mistakes and improving their product, working for no salaries for two years.
- They eventually launched a successful headset and started thinking about wearable computing.
- They faced challenges with funding and shipping, but managed to get their products released in time for Christmas.

- The speaker discusses the challenges they faced when launching a product and how they overcame them.
- They mention how they convinced AT&T to take their product even though it was late for Christmas.
- They talk about the rapid growth of their revenue in the first year of their business.
- The speaker emphasizes the importance of focusing on solving problems and learning from difficult experiences.
- They discuss the difficulties of scaling a business and dealing with setbacks such as the 2008 financial crisis.
- The speaker talks about the challenges of integrating software, hardware, and data in their products.
- They mention the importance of focusing on solving customer problems and using different tools to achieve this.
- The speaker discusses the difficulties of getting different teams to work together and the changing landscape of consumer electronics.
- They conclude by emphasizing the importance of solving problems and putting the pieces together to achieve success.

The speaker discusses the challenges faced by their company in the early days and how they overcame them. They were inspired by Palm and Nokia to create a voice interaction layer for mobile devices. Despite initial struggles to raise money, they invented noise cancellation technology and received funding from DARPA. They decided to create their own hardware device instead of licensing their technology, facing difficulties in convincing others of their capabilities. They learned from Apple's success with the iPod and received honest feedback from Steve Jobs. Despite initial failures, they persevered, improved their product, and eventually launched a successful headset. They faced challenges with funding and shipping, but managed to release their products in time for Christmas. The speaker emphasizes the importance of problem-solving, learning from difficult experiences, and putting the pieces together for success.

Hosain Rahman at Startup School Silicon Valley 2014

View the annotated transcript, and add annotations of your own, on Genius: http://tech.genius.com/Hosain-rahman-hosain-rahman-at-startup-school-sv-2014-annotated

And I'm going to just ask you, because it's sort of a strange thing.

I want you to sort of go through the chronology of the early days.

And talk about, you really did have a lot of close calls, and I'd love for you to talk about them and how you got through them and sort of.

Sort of the, not near death experiences, but defibrillator.

You actually had to sort of resuscitate it.

Yeah, and I've literally never heard of so many, so I'd love for you to give us a little story, because it was back in 1999.

Yeah, when we started the company, it was 1999.

I mean, a lot of people don't know this, but when we started, we sort of started working on the ideas in sort of 97, 98, And for lack of a better way to describe it, we were trying to build Siri for mobile devices.

We'd been inspired by Palm and Nokia and all these folks that were sort of at the front of this mobile device revolution.

And we thought, wow, wouldn't it be great if you could talk to your phone?

And that would sort of transform the user interface experience and all of that.

And so we started with this kind of customer problem, and that's always when we've been good and when we've stayed away.

When we stray away from trying to solve that customer problem, we sort of fall down, and there's been a few of those along the way.

And so very early on, we were trying – we said, okay, voice would be the great way to interact with this.

How do we make basically Siri, this voice interaction layer on top of the operating system?

And we set out to do that, and we realized everything we wanted to do with speech recognition wasn't going to work.

And at the same time, we'd sort of started to try to go raise money for this idea of a new way to interact with your device.

And I say now, it was harder for us to raise our first half a million dollars than it was for us to raise our first $200 million.

And it's because in those days, people weren't in the valley, they weren't so focused on mobile, They certainly weren't thinking about mobile voice.

And we really needed to prove that we had… Everyone thought, yes, there absolutely has to be a better way to interact with your device, but what's your hook?

And what we ended up doing is inventing this noise cancellation technology that turned out to be the biggest breakthrough in mobile audio in 30 years.

It was a serendipitous thing that we stumbled upon, mostly because we were trying to solve this problem.

And then when we did that, we said, wait, this is bigger than making speech recognition work.

It gets to the core of what people do on their phones, which is talk at the time.

Now we do lots of other things on our phones, but in those days it was a lot about talking, mostly about talking.

And so then we thought, okay, great, everyone's going to want this.

Everyone that ever heard the demo where we do these a B tests with weed whackers and blenders and all this stuff And we'd sort of take out on noise everyone's like wow I want to have that on my device And so we said on this journey we started talking to all the handsome manufacturers That were big at the time sort of Nokia and Motorola and the Korean guys, Sony Ericsson, or Ericsson actually.

No 1 actually wanted to take this technology.

They thought, yeah, it's a neat demo, we think it's cool.

the demo, but they didn't want to integrate the technology.

It was too expensive to add additional microphones.

I was with somebody from Apple the other day who was telling me they now have 6 microphones, I think, in an iPhone.

And at the time, we were just trying to convince people to put an extra 1 in to support our technology and I was just like, wow, I can't imagine what we would have been able to do in terms of audio quality with that.

But you know, again, we were struggling to get our technology into that form factor And the handset manufacturers were just sort of concerned about pennies, so they didn't want to integrate what we had.

And so at that time we were struggling with, you know, how do we fund this?

We know we had something pretty breakthrough, and what did we do?

And that was a great thing for us, the Defense Department.

We never thought we would do sort of work for the military industrial complex.

They wanted us to make our noise cancellation algorithms the foundation of their battlefield technology.

And so we thought, well, great, we have this kind of raw science, how do we take that and productize it and use these government grants to really sort of work through all the issues and take that science into a form that could be delivered in a product.

I think we were, after Dolby and Macromedia, 1 of the earliest technology companies, real technology companies in San Francisco.

In those days, there just weren't a lot of startups in the city.

You walk around, you know, we're on the same block as Zynga and Airbnb and Pinterest, and we used to share an office with Airbnb, and it's just, it's so fun that there's this vibrant community there now in San Francisco, it wasn't like that.

Yeah, I think I need to remind people, we're talking 15 years ago.

But you know, before iPhones, so I want everyone to go back in their mind and… Well,

half these people were probably in grade school.

So, we get this Dart Book grant and the other thing that was really tough is, it's so, again, also fascinating because so many of the ideas that were being kicked around in 1999.

And I remember Larry and Sergey were like our TAs in computer science.

And Marissa was my, you know, lived in the same freshman dorm, and she's now on the job on board.

And so it was this crazy time at Stanford and Silicon Valley and all these interesting ideas and people.

But you had this huge run up everything, all the infrastructure being laid out for the Internet as it stands today.

And all these ideas like there was a lot of delivery services, like Instacart, right?

And you know, there were online specific e-commerce things for niches.

There needed to be a lot either, you know, better internet connectivity, more distribution of it, whatever it was, there was just, it was just too early.

They were just sort of ahead of their time.

And I think that's another important lesson that we learned is that You've got to stay your course through that.

We thought mobile was going to be a big thing.

We thought that Palm devices would converge with smartphones.

They ended up doing it sort of 10 years after we thought they would, but they ended up doing that.

And so the sort of early lesson we learned is if you believe in what you think is right and what you think is going to happen to customer experiences and to the way people are going to interact with technology, then stay that course and put yourself in a position to do that.

And that was the sort of first thing with DARPA.

We went to a really unconventional source of capital, right?

I just found out recently that Ink2Me did too.

But you know, it's not something that, who remembers Ink2Me?

They powered a lot of the infrastructure, the internet that Yahoo bought, right?

So anyways, what happened after the DARPA funding is again, that the whole technology industry had sort of cratered.

And I remember we used to go up and down Sand Hill Road looking for money.

And people would say to us, what's wrong with everyone who went to Stanford from 1993 to 2000?

You guys have lost us billions of dollars.

I mean, it's funny because I still run into some of these people.

They don't tell me to go get a job in the same way that they used to.

But you know, and so again, it's interesting how the sort of tide had changed.

It was not a happy, fun place full of new ideas and that vibrancy wasn't there.

And so we had to figure out a way to keep going through that, to believe that, hey, mobile's going to be a big thing.

And at the time, the Valley wasn't the center of the mobile universe.

It didn't last that long, and it didn't really allow us to scale Yeah a huge way, but it did allow us to kind of productize productize and prove out what we had done And the next thing we did is we said, okay, how do we get this into a form or product that's going to go reach lots of people?

And we've been in sort of licensing discussions, because we wanted to be like Dolby, we said, you know, anyone that has an audio problem, we can be in the front end, it'll be kind of like an Intel inside or Dolby, etc.

And because of various economic constraints for these guys and focusing on profits, no 1 wanted to pay us much to license our technology.

And at the time we'd been talking to the big headset manufacturers, Punchronics and Jabra, and we thought, wow, the technology we have in this space is really disruptive.

There hasn't been sort of a computing proposition there, and we can really transform what's possible there.

And so we'd been offered some deals from those guys.

We backed out and said, you know what, we're going to go the course ourselves, and we're going to go make our own hardware device.

So this is in kind of late 02, and we thought we can do this better.

I found… Do you have hardware backgrounds at all?

Well, you know, I'd studied mechanical engineering at Stanford.

That was before there was a D school, so we were kind of in the D school.

We knew a little bit about, and some electrical as well, so we knew a little bit about how to make things.

But knowing what I know now, it's totally insane that we did it, right?

And I can't believe that…anyways, that's…so I can't believe that people thought we might actually be able to do it, right?

And so, you know, again, Long story short, we kind of put together some parts and were able to raise some capital to go build a hardware device.

Now again, in those days, building consumer hardware as a startup was totally insane.

I think, you know, we did a study at that time.

The only other sort of venture-funded consumer hardware company, well, there's 2, had been Apple, right, whenever that was in the late 70s, and then Palm.

And Palm didn't really stay around very long.

It became part of US Robotics even before they launched the company.

And so there had been no examples for people to look at and say, okay, this is something that we took through the cycle, built the product, scaled it, built distribution, got it out, and then there was an exit.

So there was no sort of pattern that people could point to.

And so talking to anybody, I mean, there was big failures like Go and some of these, and Bill Campbell was involved with that, and John Doerr and all these guys.

And so just convincing people that we knew what it was gonna take to do that was really, really hard.

And I remember when we raised venture capital in 2003, it was like 1 of the only deals that that firm at the time had done.

And it was insane to go build this stuff.

And then we set about going to build our first kind of consumer headset.

And that's when we started to really think about design.

And before that, you know, in the Valley, design was the sort of thing that once you had a little momentum, you might put like a cool case on something or a different color or whatever.

And if you wanted to appeal to women, you made it pink.

And this is sort of what people thought of design.

The only other company that was really sort of saying that there's this intersection of technology and design was Apple in sort of 01, 02, really with the iPod at a mass scale.

And so for us, we were fortunate to have such a great kind of tip of the arrow in Apple, sort of going and cutting down the path in front of us.

And again, so long story short, we put these elements together and we realized how hard it was to take these complex algorithms and to figure out all of the little details that you needed to think about in order to make this product great.

And sometimes I sort of sit up and wonder, we make lots of products and now have been fortunate to ship tens of millions of things.

But I look at, you know, Tesla that makes cars, I think about all the details that we have to think about to get it right.

And I can't imagine how Elon sort of processes all of that all the time from, you know, there's just a million different things that can go wrong, that you have to think about when you build a car, right?

And it's not dissimilar when you build these very complex consumer products where you've got software interacting with hardware and now talking to the cloud and how do these things work?

And there's very little patience people have for things not working.

Anyway, so kind of flash forward, we ended up launching our first consumer product, which was a headset.

And there was sort of a precursor where I knew that we might be going wrong on this first product.

And the first time I was fortunate enough to meet Steve Jobs was in mid-2004, right before Walton Kera's de-conference, because we were going on stage to debut our product, and I'd been set up to meet him, he's sort of the god of consumer electronics, right?

And I went and saw him and it was sort of 45 minutes of absolute just, I don't even know how to describe it, we just got killed.

Absolutely killed on every single decision, every single edge, every single technology decision.

The crazy part is I knew everything that he said was right and we had known that deep in our hearts and we didn't, because we were trying to meet a timetable and because we were trying to, you know, not run out of money and ship the thing on time, we sort of made all these trade-offs and we compromised a lot of things that we in our hearts knew better on.

And for me it was a sort of really galvanizing moment because I remember that, hey, you know, this guy who's really good at this is telling me that that was wrong, and that we shouldn't have compromised on what we know was true.

Right, and so that was the first moment I was like, shit, we should have gone with our gut.

I mean, just really, really, really, really brutal.

You know, just cutting like, oh, the only place I remember we were talking about like, this thing was crazy.

I don't know if anyone's ever, certainly probably no 1 in this audience remembers it, but it was a big headset and it connected to a clip on your belt and then it plugged into your phone.

And we were arguing about the clip and the product guy at the time that we had hired was like, oh no, but like people will clip this to your belt and Steve was like, the only place anyone would ever clip that is in your mind.

And like get it out of your mind, you know?

We probably sold more units sitting here right now than we did of that first product because it shipped.

We were product of the year in Time magazine and it was sort of and we sold like 5 of them Because it was because it had all these problems but we knew that there was this cool technology and that was this like really interesting intersection of Wait, we didn't stay true to the kind of customer experience and the problem that we're trying to solve for the user We compromise all these things to meet all these scheduled criteria or funding, and they're real constraints, right?

We knew better, and that was probably the hardest thing about my conversation with Steve.

And I did send him an email after that saying, you were right on everything.

I appreciate that you actually took the time to be honest with me, because few people are.

And it was sort of, he was always like that with us.

And then we launched several other products with Apple, like the Jambox and up and all those things.

We had a great relationship with that company and continue to, but we sort of learned a lot from that experience.

And so going a little bit further on what happened, we ended up launching this thing.

It was totally stillborn, didn't sell any, we ran out of money and now it was like, oh my God, what do we do?

And again, very long story short, people at the time that were supporting us, our investors, had sort of lost faith and they shut the company down.

People don't realize this, like, Jarlon was shut down.

I have a letter that says everyone, we don't see any value in this thing.

We've terminated all the employees, it was gone.

Because in those days too, you didn't as entrepreneurs and founders, it's a lot more friendly now than it used to be from investors.

You actually get to control your company.

We didn't have a say in these kinds of corporate decisions.

It was like, thanks very much for your ideas.

But the thing that I had and then my co-founder really had is we still believed that we had created something special.

We still believed in the mission and we still believe that we could improve people's lives and that we could allow them to communicate better and that we could sort of push this stuff forward.

And so what we ended up doing is we kind of wrestled it back from those investors.

I think I took it back we had 60 grand in the bank, 600 grand in debt.

We took another DARPA contract and we focused in and said, what are all those mistakes that we made that we knew better on?

And often failure is the best teacher that you can have, right?

Because you learn so much more because you think about every single angle at 540 degrees, you're looking at it again and again and again and you're like what went wrong and why did that happen?

Are you independent at this point or that your investors still involved?

Well, they just sort of go, they said just go take it, everyone sort of got off the board.

But you're sort of starting with a blank slate and technology.

Sort of starting with a blank slate, right?

And we had this cool technology that had all this promise and people resonated with it when they got it.

And So we figured out that it had to get into the right package or the right form or the right way that people could access it and interact with it.

And so we had failed on what I think about sort of is all what design is all about, which is the attention to the right details and resolving those details to make the best possible experience for the customer.

And so we'd missed that, and we'd missed it in a big way, and it nearly put us out.

And so, again, we focused for the next 2 years, we worked for no salaries, DARPA sort of kept the lights on, as did our friends and families, and then we focused on our first headset.

That was when we started to think about wearable computing, actually.

It's funny, because now everyone talks about wearables.

Every day, probably every hour, I get a question about wearables, and where is it going, and what's happening.

That's when we started to think about these things on your body that have all this computing power, how are they going to tie to services and all that stuff.

That was 2 years of probably another 2 days of crazy stories.

Can you talk at all about the shipping story?

We had Vinod and David Widen from Coastal Ventures had helped us get a deal with AT&T to launch our next generation Bluetooth headset.

We still couldn't raise that much capital to get it off the ground.

But Vinod and David sort of saw some problems.

So they're kind of just advising us to see what would happen.

And we were trying to launch it was late in December.

We had product in a dock in New York and the manufacturer wouldn't release it to us because we didn't have any money in the bank.

We literally had like $2,700 in the bank.

And we had to figure out how to get those products released out of U.S.

Customs so they could be delivered to AT&T.

It was singular at the time to get into stores, which…

And for anyone that's launching a product, like December 21st is not a good time to launch a product for Christmas.

So we convinced AT&T to still take it in.

And then 1 of our earliest angels is guys, Chris Birch and Austin Hearst, they gave us a letter of credit to unlock and I had to like go to JFK to go find the customs people and figure out what the harmonized code was for this type of product and get them to release this stuff so it could get in to stores and Mossberg wrote about in the journal and it sold out in a few hours.

I think we went from like 0 to 70 million in revenue in our first year.

So that's the thing that I learned that I hope people take away is when you actually go focus on ruthlessly what those things are that you're trying to solve and those problems, you can transform your business like that.

The other stuff sort of, you gotta figure it out, it's not easy, but that's the core thing, right?

And if you don't do it, everything gets really bad.

And if you do, then you can build from there.

And things transform overnight like that.

it was like overnight overnight, overnight.

We weren't fortunate in that situation where a lot, you know, we would raise a bunch of money, built out our team, made the product.

So we went 0 to 70 million with a consumer hardware product with like, at that moment in beginning of January of 2007, we had 6 people.

So we scaled that, that level of revenue grew to like 22.

And that's when, you know, Vinod and Mark and Ben and Ben Horowitz and Mark Andreessen and Sequoia guys all kind of came in and we started to build the company.

And then we had this sort of screaming 2008, business was growing, growing, growing, and then all of a sudden, you had the big meltdown of 2008, where Lehman Brothers exploded, and we found ourselves with a million units on back order, and all of a sudden those orders just got canceled.

And so we had like 70 million or 50 or $70 million worth of inventory in China.

We had to go then learn to work that down and spent a lot of 2009 working that down to 0, did a big deal with Costco to move it.

So it was just all of these bumps and bruises.

And again, we experienced it in the fall of 2011.

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Hosain Rahman at Startup School SV 2014