January 19 (Bloomberg) -- Ever since electric hearing aids were introduced around the turn of the last century, they have been too expensive for most aging Americans. Scores of inventors have tried to commercialize lower-cost hearing devices, but their products often come up short, amplifying low-frequency sound and making it difficult to hear voices.
Now a Colorado headphone manufacturer called Able Planet plans to launch a new line of affordable amplification devices, beginning in March. The first new product, the Personal Sound AMP, is smaller than a dime and fits into the ear with a band to hold it in place. At $800 a pair, the AMP is meant to be an alternative to hearing aids, which can cost several thousand dollars. Only 9 percent of U.S. seniors making less than $50,000 a year own hearing aids, according to 2010 survey by medical devices research firm Parks Associates.
Intended for anyone with mild to moderate hearing loss, the AMP employs patented technology called Linx DSP that converts sound from an analog coil into digital signal processing. It enhances the soft and medium sound typically produced by speech and music, making communication possible in noisy environments, and can be dialed up or down by briefly placing a hand over the ear.
Chief Executive Officer Kevin Semcken, who bought Able Planet six years ago when it was struggling with debt and multiple design lawsuits, is leading the push into the hearing device market. While the company has derived much of its revenue from sales of its consumer stereo headphones, this isn't the company’s first foray into hearing loss technology. In fact, Able Planet was founded specifically to produce hearing devices. But the high cost of research and development of personal sound devices proved prohibitive during the recession.
In 2011, the company had $30 million in revenue, 90 percent from its consumer electronics, which are sold online and in retailers like Costco nationwide, as well as in Mexico and Japan. The 50-employee Wheat Ridge, Colo., business has been competing against industry leaders such as Bose, Monster Cable Products, and Sony in the more than $900 million domestic market for stereo headphones. Able Planet captures about 1 percent of that market, says Ben Arnold, an audio and video industry analyst at market research firm NPD Group.
Semcken, 52, a serial entrepreneur and private investor who has built and sold seven medical technology companies, spoke recently with Bloomberg.com contributor Karen E. Klein for this as-told-to Entrepreneur’s Journal:
I found Able Planet at a technology show in 2005. The founders were struggling with lawsuits and solvency but they had filed initial patents. I asked them to build me two headsets, one with their patented audio technology and one without it. I have a hereditary 30 percent hearing loss in my left ear. When I tested the headsets, they were playing Dean Martin’s “You’re Nobody ’Til Somebody Loves You.” I could not hear the high-frequency cymbal beats in my left ear, but when they switched to Linx, the cymbals moved in my head like they were turning a balance wheel from speaker to speaker.
I said, “Oh my God, this thing works!” I bought the company in January 2006 with my partners at HealthTek Ventures. Instead of selling high-priced hearing aids through audiologists at hearing aid centers controlled by very large corporations, I decided to disrupt the business. The majority of people with hearing loss have mild to moderate loss so they can’t communicate fully in a noisy environment. They’re at one end of a table where people are having fun, telling jokes, and they’re smiling and participating the best they can, but they can’t hear the joke. I wanted to get those people sitting up, hearing and in the game without having to pay $3,600 for a pair of hearing aids.
I can look at a product and say, “Is it cheaper, faster, better? I can sell that.” I wouldn’t ever launch me-too technology; that’s boring. It has to add something significant that the market can approve. In 1994, I started HealthTek Ventures with some partners to invest in health-care technology. I invest my own money and I only do deals that I run myself. I control the decisions where I have experience and release control on other decisions to the people I’ve worked with and trust.
[At HealthTek] I see probably 60 deals a month and most of them suffer from founder-itis. The founders are technical people who don’t have good financial training and they never recognize their own limitations. They burn through their investors’ money, they don’t hit milestones, and by the time they get to Series B [investment rounds], they’ve already lost the company. I knew a CEO who would take four of us out to dinner and he’d dump $1,500 without thinking twice. I put startup money in $1 million tranches and set milestones, so we have to prove the technology or get into clinical trials before we open the next tranche.
[Able Planet] won the Best of Innovation Award at the 2006 Consumer Electronics Show in Las Vegas against Motorola and Bose and all these monster corporations -- and we literally had five people in our company. Top retailers like Best Buy and Costco came to us about selling our patented technology, so we began developing consumer headphones with the strategy of funding R&D on the audiology side with the revenues from our general sales.
In 2009, we had our bank line of credit disrupted at the height of the recession. I haven’t ever defaulted on a loan but the bank we were using got in trouble because they had loans to early-stage companies that went bankrupt. If it wasn’t for private investors, Able Planet would not have made it. At least half of our expenses come from attorneys and product development because innovative design and winning awards are what drive our company.
Last year, 2011, was our first full year of profitability. In this first quarter of 2012, we’ll be moving into Costco stores in the U.K. and securing manufacturing agreements for our personal sound amplification devices. In the next couple of years, I’m moving Able Planet to an exit. It will probably be a public company, and that’s the point where I leave. I don’t want to be a big-company CEO. What drives me is getting people with hearing loss off the sidelines and into the game. Disruptive technologies are beautiful ways of getting that done.
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