Exclusive: AI computer on your ears

Driving the news: Rugolo on Wednesday demonstrated the Iyo One, a wearable computer featuring two large earbuds, custom-fit for the wearer and capable of pass-through and even augmenting sounds from the real world, while also responding quickly to a wide range of voice queries.

• The Iyo One computer packs a lot of hardware — including 10 microphones — into metallic discs the size of a half-dollar that sit on the user's ears. It's slated to come in both WiFi and cellular models, though the model Rugolo showed on stage only supports WiFi.
• The company was spun out of Google parent Alphabet's X moonshot, where Rugolo began developing the product six years ago. Iyo has raised $21 million in funding, including from Alphabet.
• Iyo is taking deposits now and aims to ship the product this winter, with the WiFi version expected to cost $599 and the cellular-equipped version estimated at $699. Customers for the latter device will also have to pay a monthly cell phone bill.

What they're saying: In an hourlong interview in Vancouver last week — his first after debuting the device — Rugolo made the case that AI models are just getting better and better, paving the way for a wearable computer that can act as therapist, coach and tutor, all controlled through voice.

• "That felt extremely powerful to me," Rugolo told Axios. "And it felt like a new platform."
• Developing a peripheral device that depends on a smartphone might be easier, Rugolo said. But it wouldn't allow him to build the new kind of computer he wants.
• "These other platforms, both Android and iOS, they're very restrictive about what you can do," Rugolo said. "So if you're trying to create a new user interface, it's not easy."
• Rugolo's passion is undeniable — he once spent 70 days straight on Google's campus, living in his van and eating all his meals there as he worked on early versions of what became the Iyo One.

Flashback: Humane debuted its AI pin on the TED stage a year ago, enticing the crowd with its novel projection interface.

• The AI Pin is just now coming to market, a bit later than planned, and has received harsh reviews. Marques Brownlee called it the worst product he's reviewed; the Verge's David Pierce said he wouldn't recommend anyone buy the device.
• The Iyo One is making a similar pitch, at least on the surface, offering its own AI-powered operating system controlled via voice that could allow users to leave their phones behind.
• With just 22 employees, Iyo is far smaller than Humane, with a fraction of its staff and funding. Rugolo says he will look to raise more money soon.

The big picture: Hardware is hard, especially for startups. Modern hardware startups typically outsource manufacturing, but often get bogged down with problems ranging from squashing bugs to customer support.

• There are several things that will make Iyo's launch extra hard, including finishing the hardware design, incorporating cellular technology and finding developers to build tools that take advantage of it.

• The Iyo One offers customers a silicone earpiece customized to the shape of their ear, but that requires a professional fitting. Rugolo says Iyo has a network of audiologists and ear, nose and throat doctors established in 10 cities that can create the molds necessary to make the silicon earpieces, but that will add cost for Iyo.

For his part, Rugolo believes that the Iyo One has an opportunity to find a niche if it can offer the best sound quality and comfort.

• At launch, he wants to have third-party apps for music and search as well as a modest set of first-party apps, including the ability to make calls, set timers and more. Notably, Iyo is not building its own assistant or email app, with Rugolo saying he wants to leave as much room for developers as possible.

What's next: Rugolo has a long to-do list, including building the cellular version of the product, finding a top-tier music service and finalizing the design. Still, he hopes to ship the first devices before the end of the year.

• "We really want to have it done for Christmas because we think it'd be a really cool Christmas gift for those audio lovers out there," he said, while acknowledging that would require everything to go right.
• "We're gonna grind hard," Rugolo said, but added maintaining quality is more important than hitting a date on the calendar. "Slip is very possible."

The bottom line: With this generation, success would mean selling tens of thousands of devices, according to Rugolo. "I don't have delusions of grandeur," he said.

• At that volume, though, the company could struggle to attract attention from large app makers accustomed to devices that have millions of users.