In 1989, Lloyd Watts headed to Caltech to get his PhD in electrical engineering and join microelectronics pioneer Carver Mead's effort to understand the human brain. Watts's task: studying the mechanics of the human auditory pathway.

Over the next two decades, Watts's work morphed into a startup called Audience, which amassed $45 million in venture funding. This year, it rolled out its first product: a chip for mobile phones that cancels out a wide range of background noises--even loud public-address systems in airports. The technology could also improve the performance of voice-recognition systems. Today's customer-service and voice-command systems are increasingly sophisticated, but they can still be defeated by background noise.