The interviewer has excellent street cred in Australia as a financial journalist.
The Interview provides a bit of background into the tech challenges of hearables
Australian company Nuheara’s IQbuds can drown out background noise and amplify voices
Uses a Perth developed technology called SINC to allow users to adjust sound with a phone app to their specific needs
Wireless, compact and rechargeable, Nuheara’s IQbuds have been garnering attention and rave reviews. In 2015 they were the first wearables company to list on the ASX and in 2016 there was a successful Indigogo campaign that exceeded CEO, Justin Miller’s expectations.
But the most fascinating aspect of these buds – they put a stop to pub-deafness – the problem where you cannot really hear what is being said in a restaurant or pub.
Justin explains the technology behind these wireless, inner ear marvels – they are loaded with SINC (Super Intelligent Noise Cancellation) which can be controlled by an app on your phone so you are in control of how much you hear or choose not to.
Justin Miller tells Alan Kohler a bit about the company’s history and what’s next for this Western Australian tech start-up.
Perhaps we should start with a bit of background on the business. You founded the company with David Cannington who now lives in San Francisco. Tell us when you did that and what was the basis of it? Who invented the technology, the IQ earbuds that you are selling?
David and I came up with the concept in 2014. It goes back a little bit further than that. David and I founded an industrial hearing company back in 2005/2006 and built that up. That was related to enabling speech conversations in noisy industrial type environments.
How did you do that? Tell us a bit about that. What was the technology behind that?
That was some intellectual property out of some universities in Western Australia and cutting a long story short, we productised it, commercialised it and monetised it. In fact I spent 4 years in the US building that business up. That essentially enabled conversations to be had, whether by phone, 2 way radio or face to face, in noisy industrial type environments. I am still a major shareholder in that company and that company continues to go from strength to strength. Big companies from the US Marines, to Alcoa, you name it, a lot of big companies are now using that technology and those products.
We have been building products on the ear for over a decade. I came back to Australia just over 3 years ago with my family and put a new CEO into the US. We started thinking about perhaps what’s next. And if I can be very brief as to how we came up with the concept of IQbuds, it was those people that we visited in those industrial type environments always had the same issue and that was – how can I get one of these for the restaurant.
When you say “one of these”, the industrial product was a product that went in to the ear and allowed people to hear things, or at least subdued the noise around them, is that right?
That’s right. Essentially it was earmuffs and to a lesser extent some external type earplugs that stripped away background noise and promoted conversation or speech. That company, called Sensear, developed these products and we sold them globally. In fact we did a licencing deal. Motorola, OEM wise, purchase all their Bluetooth headsets from Sensear. It is a great company and great technology, but if I can relate it to the differences between where IQbud sits today and what Sensear do – although industrial noise is very loud, the context of the noise versus speech is very different. That is that the characteristics of noise in an industrial context are very different to the context of speech. The ability to separate them, I won’t say that it’s easy, but it is easier than what we are faced with in social settings, because inevitably in social settings the conversation that we are trying to promote is exactly the same in characteristics as the noise that we are trying to supress, which is other people’s voices.
Aren’t you also, with IQBuds, trying to allow people to listen to music, but also hear someone talking to them.
Definitely. There are a couple of different things that we do. Hearing augmentation is something very new. When we say augmented reality, most people immediately think of visual and have largely forgotten about the ears. We enable people to overlay their digital world with their physical world. An example of that may be that you have gone to the football, you are streaming the commentary into the earbuds, but you then also have the ability to turn down the crowd and still have a conversation with the person next to you. You are able to control all those inputs and have them feed in at the same time. This is the augmented reality of what IQbuds actually offer. Some very smart technology.
This was the concept that you had in 2014 with David and said OK, let’s see if we can bring that kind of technology to the commercial market and create some buds. How did you go about developing them?
That is a good question because David and I aren’t scientists. We had to draw on a lot of people that we had come to know over the previous decade in building products. We went back to one of the universities, Curtin University in Western Australia where we continue to fund post-doctoral researchers, Nuheara does. We drew on their researchers and their professors.
We also went back to some of the people that we had been involved with over a decade that had moved on to companies like Dolby and hearing aid companies and brought them back together under the premise that we could build a product such as this and if we could we could take it global. As they say, we have been able to achieve that and are now selling our product globally.
I presume it is more complex than simply just having a microphone next to a speaker.
That is the basic premise of it, you do have a set of microphones and you do have a speaker that is your output, but there are a lot of complexities. Effectively what we have done is put a computer on each ear and by putting a computer on each ear we are able to process and do some pretty smart things. You may be familiar with other sorts of wearable type technology that is coming to the fore, things like Fitbits, Garmins, smart watches and these types of things. Computers that are now worn on the body. Essentially we are doing pretty much the same, albeit on the ear, which is allowing us to do some pretty smart things that haven’t been achievable on the ear before.
Explain what those smart things are. What does the the processor do?
If we break it all down, the processor is running a series of algorithms, which is mathematics that is allowing us to compute what we want to compute and in noisy social settings that may well be promoting the conversation at hand while supressing other conversations. It may be that we are on an airplane so we are supressing the airplane noise but allowing us to have a conversation. Then on top of that, obviously this ability to bring the digital and the physical worlds all together.
We have brought a number of products into one wireless earbud they are totally independent, so they are two wireless earbuds that do talk to each other. We have connected the ears wirelessly. That allows us to do a multitude of things. Your basic things like phone calls and music, that is a given. Hearing assistance, the ability to boost conversations in noisy social settings. For someone like me who has a deafness in one ear, it is a godsend. Also, enables us to use voice activation through the ear to control our smart devices. For example, if I am out running, I can simply touch my earbud and ask the phone to move to the next track or call someone or otherwise. It is also allowing us to be voice enabled and hands free as well. Those are some of the smart features that the product offers.
The bane of my life, Justin, is noisy restaurants. If I wear it in to a noisy restaurant, can I turn down the noise and better hear the person sitting opposite me?
Absolutely. Funny enough, that is the big impact of the product. Most of the people that have bought it are 35+ and no matter what happens, 35+ your hearing is starting to degenerate and we all suffer from what we have termed “pub deafness” which is that inability to hear in those noisy social settings to the extent that very expensive hearing aids aren’t solving that problem either because it is very difficult to promote one conversation whilst supressing others, but that is ultimately what we have been able to achieve with the technology that we have got in IQbuds.
As I understand it, the things are connected to an app on your phone, so I take it what you do then is to choose via the app what settings you want for the earbuds.
Yes, so you can personalise it for your own hearing profile.
Can you tell the app I am going into a noisy restaurant now and it will then adjust accordingly?
Yes, you choose your profile so restaurant, office, plane, street. There are multitudes of profiles that you can choose and then tailor to your own comfort as well. Everyone’s hearing is slightly different so we have the ability to adjust not only your individual personal hearing profiles but also the profiles that we have preloaded for different types of settings, so that you can tailor it to your own hearing experience.
You have preloaded, pre-programmed a range of algorithms that adjust according to standard problems such as airplanes and noisy restaurants.
And driving and all those things. But we have the ability to adjust each of those for different situations as well. We have got intelligent noise control that allows us to turn up speech versus noise or turn down speech versus noise and then we have got some volume controls, so you can turn the whole world up or the whole world down. Then we have the ability to overlay certain things as well.
Could you use them as a kind of hearing aid, could you?
We have to be careful about calling ourselves a hearing aid, we certainly don’t, but we certainly offer those with mild to moderate loss, who don’t want to invest in a hearing aid that is somewhere between $3,000 and $5,000 per ear. We do offer them some ability to adjust their profile in a mild to moderate sense for a set of IQbuds that is $400 and without a need to go to an audiologist. We do offer some support there, absolutely.
When you say driving, can you wear them while driving for listening to music and using the phone but also hear the traffic noise around you and someone beeping you and so on? Because that’s clearly a danger with wearing headphones in a car.
Definitely, in a car and also running. I run with my IQbuds, I listen to my music and I can take my phone calls, but I can set it so that I am still aware of my surroundings as well. This is the hearing augmentation that we offer, that is the ability to overlay these sorts of things, so absolutely. Most technologies that are offered today like noise cancellation headphones are either on or off. You are either in quiet, or you have to take them off to have a conversation. And at the other end of the spectrum you have got amplification techniques, like hearing aids and these sorts of things, that amplify everything. What we are trying to provide is a sliding scale that allows you to adjust between those two functions.
In the time since you started doing this with David in 2014. Apple has released earbuds which are wireless. Isn’t there a chance that they will blow you out of the water. They are a pretty big company, they will at some point, if they aren’t working on it already, make those things intelligent like yours.
Yes, there is a potential for that, but if the intelligence existed it could have been placed in a wired earbud as well. It is not to suggest that they can’t do it, it is just the fact that the wireless aspect of this hasn’t facilitated the smart technology in terms of the processing. So yes, it is true that they did bring out a set of wireless earbuds late last year, which for us was actually a godsend. It actually validated something that we had started working on 3 years before, which is the whole wireless earbud, but an intelligent version of that. Apple’s version has enabled us, from a marketing perspective, to help us differentiate ourselves as intelligent and do things over and above what Apple does. So it was great. They validated our space and it’s enabling us to show that we are a lot more intelligent than those particular earbuds.
Their earbuds are dumb, that is true, but for them, I presume, they must be thinking about making them intelligent and for them it will be a build versus buy situation. I would have thought that they are more likely to build their own than buy yours.
Potentially, but that shouldn’t stop us from innovating or offering our solutions. If we all sat here, nervous about what Apple and Google and all these big companies are doing, we would never actually achieve anything. From our perspective we are comfortable. I have 7 PhD’s on my staff from antennas to acoustics to digital signal processing. It is a complex task, and even the dumb bud that Apple brought out last year, they did something very un-Apple which was announce the product and then weren’t able to supply it. They had issues in manufacturing. The wireless earbud is actually a very complex thing and the ear is a complex thing. We are not underestimating Apple or otherwise. But by the same token, that shouldn’t stop us from getting out there and making a name for ourselves and selling these things globally to consumers that absolutely want it.
Good for you. How many have you sold?
We have just gone through our first 6 months of sales and we have done about $3.5 million dollars’ worth of sales, the majority of those out of the US.
How many units is that?
That is close to 10,000 units and we have just hit retail. A lot of that was our backorders. We formally launched at CES in Las Vegas in January of this year and started shipping in January and we concluded those pre-orders and backorders in April, early May then hit retail in a big way throughout the course of May and June. It is very early for us in terms of retail. That said, we have just announced another 210 store deployment with Best Buy in the US, which is great for us.
Is Best Buy your most enthusiastic stockist?
They are probably the biggest consumer electronics retailer globally, so yes, we are enthusiastic about it. We are now stocked on Amazon in the US, Brookstone. We recently announced our European expansion through Dixons Carphone, a big consumer electronics retailer out of the UK and Europe. We are expanding and broadening our horizons, but it is early days for us from a retail perspective.
How much are you selling them for?
$399 Australian is what they retail for.
What do you actually get for them on average?
A wholesale point of view? It is different. Amazon you are offering up single digit margins where the likes of the major retailers take a 50% margin, and selling direct we retain full margin. There is a fair discrepancy there across the full retail outlets which is why it is important for us to be able to offer in a multitude of channels.
Are you selling many direct on your own website?
Yes, we are. We maintain warehouses in LA, Sydney and London, so we have the ability to ship in 1-2 business days pretty much anywhere in the world right now. We are nicely set and the next couple of quarters are all about really exploiting what we have been able to achieve on a retail front and push, hopefully, many more tens of thousands of units out.
Well there was a nice marketing video that you did that I presume got quite a few hits, did it?
The unboxed therapy one?
I saw one video, I assumed that you had made it but maybe you didn’t.
The reviews are coming in thick and fast now that we have hit retail and yes, there was one that was done recently, independently of us that achieved a million views in a little over 24 hours. In the last 2 weeks it is up to 2 million views. That is phenomenal.
That is gold.
It went viral and it is gold. We effectively sold out everywhere. It was incredible. That was the cost of a set of IQbuds that we sent out for review. It is a changing world. It is a changing landscape. It is not about heavy investment in advertising on a bus or a newspaper or otherwise. There are ways and means to reach global markets now and we are using them to our fullest advantage.
What do you think is the future development of it? It strikes me that they are quite big, they are bigger than the Apple earbuds. Are you working on making them smaller so that you can’t actually see them? Is that an aim that you have?
No, not really. I think we are about being obvious, being cool. When it comes to the hearing systems point of view, we are not trying to hide it necessarily or create a new stigma. We are just trying to look like everyone else in terms of wireless earbuds and we won’t necessarily make it smaller because a lot of what actually sits in the earbud today is battery, and people want more and more battery life. As batteries get better, all we do is retain the same size but offer more power. I doubt that we will actually make them too much smaller, in fact we have got children as young as 8 and we go from 8 to 80 in terms of size range, so size is not a huge issue for us for the moment, because we are getting pretty good fits.
Are they customisable? Everyone has different sized ears, how do you organise that?
Funnily enough, the way that we designed them, we put a lot of effort in to the design and it is designed to fit about 90% of ears. We offer 8 different sized and shaped ear tips. They fit on to the IQbuds. For most people the outside shape of the ear is pretty much the same. It is what happens on the inside which is the ear canal. Some people can have an extra-large on one side and extra-small on the other. There are a diverse range of sizes of ear canals and that is why we put so many tips in the box. That is where, ultimately, the fit lies in the size and shape of the ear canal.
Fascinating. What is the business plan? Have you done any forecasts of revenues based on how you are going?
No, not yet. If you are not aware, we are ASX listed, so from our point of view it is very early days from a retail perspective to put those sorts of forecasts out. We will digest what happens over the next quarter as we are fully into retail. The good thing about being nicely positioned into global retail now is that we are a good 6 months out from the biggest consumer spending period, which is Christmas, and hopefully we can maximise our traction over the next 6 months in the lead up to Christmas. I think that once we get through the next 6 months and we have cemented those retail relationships, we have good traction, then ultimately we may well be in a position to start to provide some forward looking statements in relation to units sold and revenues.
It has been great talking to you Justin. I appreciate it. Thank you.
Thanks Alan, cheers.