Digital Furnace Corporation Gains $6 Million in Venture Financing.

ATLANTA--(BUSINESS WIRE)--April 1, 1999--

New Funding Will Bring Data/Voice-Over-Cable Technology to Market

Digital Furnace Corporation today announced that it has received equity investments totaling $6 million. This funding will enable Digital Furnace to complete the development of its groundbreaking PROPANE(TM) technology and deliver products that enable two-way voice and data transmission over existing cable television networks.

Partners in the financing round are Alliance Technology Ventures and Noro-Moseley Partners, both based in Atlanta, and Sevin Rosen Funds of Dallas and Palo Alto, California.

Founded in 1998, Digital Furnace has created a unique software technology that dramatically increases the return path or "upstream" transmission capacity of cable TV networks. Although such networks offer tremendous "downstream" capacity to users, cable TV operators have been extremely limited in their ability to transmit information from users back through the network. Improved upstream capability is essential to operators' plans to use their existing networks for local telephone access and other two-way communications services.

"To unlock the two-way potential of their customer connections, operators have faced the unappealing choice of limiting services or investing in expensive upgrades to the physical cable plant," said John Lappington, president and CEO of Digital Furnace. "PROPANE eliminates the need for this trade-off. It's a cost-effective solution for the technical and business hurdles of phone, data and video convergence."

Industry-Leading Technical Talent

PROPANE technology was developed by John Limb, chief technical consultant and a director of the company, and Daniel Howard, vice president and chief technical officer of Digital Furnace. An Eminent Scholar at the Georgia Institute of Technology, Limb is recognized as one of the world's top experts in communications technology over "shared media" such as broadband cable networks. Limb and Howard are co-founders of the Broadband Telecommunications Center (BTC), a research facility within the Georgia Center for Advanced Telecommunications Technology.

"John and Dan give Digital Furnace a substantial advantage over other start-ups in the cable communications field," said Stephen Fleming, general partner of Alliance Technology Ventures. "This was a unique opportunity for us to invest in the kind of science and engineering talent that can define an industry."

Solutions for a Huge New Growth Area

Limb and Howard developed the patent-pending PROPANE technology to vastly improve the efficiency of transmission on the limited upstream path of cable networks. PROPANE uses advanced proprietary communication algorithms that offer three to six times the transmission capacity of alternative technologies. PROPANE can make the most of the existing bandwidth and also allow customers to link several devices--such as computers, multiple phone lines and video feeds--to a single cable connection.

"Digital Furnace was a compelling choice for our first investment in cable technologies," said Charles Phipps, partner at Sevin Rosen. "Two-way communications over cable will be the next big step in this industry, and Digital Furnace has created a solution that perfectly matches cable operators' business plans."

PROPANE will help meet the needs of the small office/home office market that many large operators are targeting. Using PROPANE, cable operators can provide small businesses and telecommuters with a package of phone lines and an always-on Internet connection over a single cable line.

Based on cable operators' high adoption rates in recent market trials of voice and data packages, Digital Furnace forecasts 80 percent compound annual growth in cable subscriber revenue from small office/home office markets, with total subscriber revenue projected to reach $700 million in 2004.

Bringing the Technology to Market

To market PROPANE in this converging communications environment, Digital Furnace has recruited a management team experienced in both the cable and telephone industries. Heading the team is Lappington, a former executive of Scientific-Atlanta and ANTEC Corp. and a founder of ESP, a successful cable-technology start-up.

"With their experience in bringing new communications technologies to market, we are convinced that this team can deliver on the technical promise of PROPANE," said Jack Kelly, partner of Noro-Moseley. "John has the proven ability to manage successful long-term relationships with the leaders of the cable industry."

Already, PROPANE has been positively reviewed with two of the country's largest cable operators. Digital Furnace plans to complete laboratory work on the technology by this fall and ship product for large-scale field trials with cable operators early next year.

About the Companies

Founded in 1998 at Georgia Tech's Advanced Technology Development Center, Digital Furnace is developing next-generation communications products that will enable advanced voice, data and video services for small office, home office and residential markets over broadband cable networks.

Alliance Technology Ventures is an early-stage venture capital firm specializing in life sciences and information technology startups. The firm has over $100 million under management from major corporate and institutional investors and focuses primarily on opportunities along the East Coast, with a special emphasis on the Southeast. (www.atv.com)

Based in Atlanta, Noro-Moseley Partners was organized to find, acquire and manage investments in a limited number of companies located primarily in the Southeast. Since 1983, NMP has created four limited partnership funds totaling approximately $262 million in capital and has invested in over 100 companies. (www.noro-moseley.com)

Sevin Rosen Funds was founded in 1981 and has invested in over 100 companies. Sevin Rosen has raised more than $500 million and has been the lead investor in companies such as Compaq, Lotus Development, Cypress Semiconductor and Cyrix. (www.srfunds.com)