Diffusion Raises $6 Million in Latest Funding; Canaan Partners Added as New Investor.

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--May 11, 1998--Diffusion, Inc., developer of client communications solutions for corporate enterprises, has raised $6 million in a new round of venture funding. The additional infusion of capital brings the total raised thus far to more than $17 million.

The funding comes from a new investor, Canaan Partners, and from previous venture investors Institutional Venture Partners, Brentwood Venture Capital and Matrix Partners.

Jim Gagnard, Diffusion president and CEO, said the money will be used in part to aggressively pursue specific vertical markets, such as commercial banking, investment research, pharmaceutical and insurance, where there has been strong early interest in Diffusion Server as an information-delivery vehicle for customer, employee or supplier audiences. Shipping since mid-1997, the Diffusion Server has been selected and deployed by leading Fortune 1000 companies including SmithKline Beecham, Siemens-ROLM, Church & Dwight (manufacturers of Arm & Hammer products), Ascend Communications and Clarify.

Eric Young, general partner with Canaan Partners, said, "We are enthusiastic about the market opportunity that Diffusion is addressing. Diffusion's unique Web-based solution informs appropriate people of business-critical events and information updates wherever they may be, in whatever media they need. We believe this is a much-needed solution that represents the next stage in the Internet evolution."

Service-oriented organizations such as commercial banks, stock brokerages and investment management firms are rolling out client Web sites to provide self-service access to information and activities. A client self-service system, the Diffusion Server enables businesses to start with client Web sites and add proactive communications to contact clients automatically, notify them of key events and updates, and present them with decisions to be made.

The Diffusion Server reaches clients via their designated communication media, including email, pager, cellular phone, Web and fax. The Diffusion Server also leverages the interactive abilities of emerging mobile communication devices to enable clients to take immediate action wherever they are.

Diffusion earlier this month was named to UPSIDE Magazine's "Hot 100," a list of "the 'best of the best' companies with the most promise." The list was compiled based on input from investors, financial analysts and other industry experts. UPSIDE cited Diffusion Server as the "first comprehensive business information delivery application."

Diffusion, Inc., was founded in 1995 to develop and market client self-service solutions that address the complex business issue of effectively communicating with people across the extended enterprise. The Diffusion Server proactively contacts clients to alert them of events and information updates via their designated communication media, including email, pager, phone, Web and fax. The Diffusion Server also leverages the interactive abilities of emerging mobile communication devices to contact clients and let them take immediate action wherever they are.

Diffusion sells the Diffusion Server through direct and indirect channels, such as Netscape Communications, Inc. that resells the Diffusion Server under their brand name as the Netscape Diffusion Server. Diffusion company headquarters are located at 321 Castro Street, Mountain View, CA 94041. For more information, visit the Diffusion Web site at http://www.diffusion.com. -0-

Note to Editors: Diffusion is a trademark of Diffusion, Inc.

CONTACT: Diffusion, Inc.

Monica Jakubiec, 650/237-8525

[e-mail]

or

Ulevich & Orrange, Inc.

Matthew Quint/Janis Ulevich, 650/329-1590

[e-mail]