(Business 2.0) – Treatment of autism, sadly, is a rapidly growing market. The incurable developmental disorder--which affects skills such as communication, social interaction, and perception of others' emotions--already afflicts nearly 1.5 million children and adults in the United States. And according to the Autism Society of America, that number is increasing by 10 to 17 percent every year. "Educating these kids is a huge expense," says Dan Feshbach, co-founder of San Francisco-based Animated Speech. "Not to mention an exhausting battle."

With a little help from a computer-generated character named Timo, Feshbach is addressing the unique educational needs of kids with autism and other language, speech, and hearing challenges. Since releasing Animated Speech's Timo software in April 2005, Feshbach has sold more than 2,000 copies. The product costs $99 for a home version and starts at $350 for schools.

Father to a 13-year-old autistic boy, Feshbach was experiencing the ups and downs of teaching a language-impaired child when he heard about Baldi, a computer-based conversation partner that was shown to be effective at engaging autistic kids. So he contacted Dominic Massaro, the University of California at Santa Cruz psychology professor who created Baldi, and offered to partner with him. It took three years to negotiate a licensing deal with the university, but finally the pair managed to get Baldi--since renamed Timo--out of the lab and into a commercial application.

Timo has mousy brown hair and a tendency to tell long, repetitive stories. But with more than 100 "strings"--mathematical parameters controlling his jaws, tongue, lips, and other features--his programming can simulate both speech and facial expressions. "Some students with autism escape on the computer," says Lauren Franke, a psychologist who's responsible for the editorial content and design of Timo products. "Timo can help them learn to respond to people."

Timo software such as Team Up With Timo: Stories has been purchased by schools in 15 states and by customers in Australia, Great Britain, and Japan. "My students compete among each other to use the software," says Stan Edelbrock, who works with autistic children in the Placentia-Yorba Linda Unified School District in Orange County, Calif. "Animated Speech has fulfilled a significant need."

Next, Feshbach plans to develop a tool that will let parents, teachers, and speech therapists create their own Timo-based lessons. "Children, especially those with learning difficulties," he says, "are not one-size-fits-all."