How did DEX Lighter, a derivative product that transitioned from AI to encryption, attract the favor of top Silicon Valley investors?

Author: Ben Weiss

Compiled by: Tim, PANews

Since the emergence of ChatGPT in 2022, "shifting from crypto to artificial intelligence" has become a popular trend in Silicon Valley. Opportunists rushed to jump from the waning hype market to the newer and more glamorous tech sector. However, Vladimir Novakovski went against the tide, choosing to transition from artificial intelligence to the crypto industry. He attracted numerous well-known investors to support his startup Lighter, which has now become one of the fastest-growing companies in the crypto space.

Lighter is both a decentralized exchange and a blockchain. Lighter supports users trading perpetual contracts (a type of derivative that allows traders to speculate on the future price of a token). Novakovski stated that Lighter will also soon launch a spot market supporting cryptocurrencies such as Bitcoin.

On Tuesday, Lighter announced it had raised $68 million in a new funding round. Founder and CEO Novakowski, 40, revealed that the round was co-led by Peter Thiel's Founders Fund and Ribbit Capital, with other participants including Haun Ventures and Robinhood, an online brokerage firm that rarely invests in venture capital.

According to two sources familiar with the deal, Lighter is valued at approximately $1.5 billion in this funding round. The sources requested anonymity because the negotiations were private. Novakovski declined to comment on Lighter's valuation but stated that the deal includes equity and token allocation rights—specifically, an allocation of unissued tokens.

In an interview, Novakovski stated, "Our goal is to become the infrastructure layer of the financial markets, ensuring that all transactions are conducted fairly, accurately, and transparently."

From trading to AI, and back to trading

Lighter's funding comes at a time when on-chain perpetual contracts are generating a lot of buzz in the market. This type of derivative, which is popular in the crypto market, allows traders to hold futures contracts with no expiration date, as long as the necessary margin requirements are met.

Perpetual contracts have existed for years, but the recent rise of decentralized exchange Hyperliquid has shaken the market. Hyperliquid co-founder Jeff Yan, with only 11 employees, has successfully challenged the dominance of crypto giants like Binance. Binance has begun heavily supporting its Hyperliquid competitor, Aster, in a counterattack.

Lighter is entering a highly competitive market, but Novkovski has the intellectual capital to compete. "Our primary reason for investing is Novkovski and the team he built; that factor accounts for 85% to 90%," Joey Krug, a partner at Founders Fund, told Fortune magazine.

Novakovski immigrated to the United States from Russia as a child and later joined the U.S. national team to compete in the International Olympiads in Informatics and Physics. He entered Harvard University at the age of 16, graduated early, and then joined the hedge fund Citadel Investment Group at the age of 18. Novakovski said that Ken Griffin, the CEO of Citadel Investment Group, personally recruited him.

Before starting his own business, Novakowski worked as an engineer and trader at several companies for nearly 15 years. In 2017, he co-founded the AI-powered social platform Lunchclub with Scott Wu, who had previously worked at the investment firm Addepar.

They raised approximately $30 million at the beginning of the COVID-19 pandemic, and Lunchclub attracted a large number of socially awkward users seeking opportunities to make friends. However, by 2022, user growth had stalled. Novakovski stated, "We faced three choices at the time: maintain a small-scale operation to achieve profitability, try to transform the product into something as successful as TikTok or Snapchat (although this option seemed less feasible), or move in a new direction that we were truly passionate about."

After leaving Lunchclub, Wu founded Cognition, an AI programming startup that is now valued at $10.2 billion, while Novakowski decided to return to his old profession as a trader.

He transformed Lunchclub into Lighter, retaining 80% of the staff and successfully raising new funding: $21 million in an undisclosed funding round in 2024 led by Haun Ventures and Craft Ventures. Other participating institutions included Dragonfly and Robot Ventures. With this latest round of funding, Lighter's total funding has now approached $90 million.

After two years of research and development and testing, Lighter was officially launched in January of this year. Unlike Hyperliquid, which is based on a self-developed Layer 1 blockchain, Lighter is a Layer 2 network built on Ethereum. Novakovski believes this is the core difference between the two competing products.

According to data from the crypto analytics website L2BEAT, Lighter's total value locked (TVL) has rapidly become one of the top Layer 2 networks on Ethereum. Novakovski revealed that his business is already profitable. When asked about the comparison between Lighter and Hyperliquid, he stated, "We are quite satisfied with our current market position, but we are still working on it."