20VC MercadoLibre Founder Marcos Galperin on Optimising DecisionMaking, Effective Resource Allocation, Growth vs Profitability, Fundraising Strategies and more on the Journey To Build a $72Bn Market Cap Company

In this episode of 20 VC, host Harry Stebbings interviews Marcos Galperin, the founder and CEO of Mercado Libre, a leading company in Latin America with a diverse business portfolio including commerce, payments, and logistics. Galperin discusses his journey from conceptualizing the idea during his MBA at Stanford to scaling it into a $78 billion company with a projected 320 employees by year-end. He emphasizes the importance of leading by example, fostering a company culture that is unafraid of risk, and the necessity of adapting and innovating to remain competitive. Galperin also touches on his approach to decision-making, talent retention, and the challenges of navigating financial crashes. He shares insights on vertical integration in business, his personal relationship with money, and preparing for a future transition from his CEO role while maintaining Mercado Libre's entrepreneurial spirit.

• Marcos Galperin scaled Mercado Libre from a business school idea to a $78 billion market cap company.
• Mercado Libre operates in 18 countries with a projected 320 employees by the end of the year.
• The company encompasses commerce, payments, and logistics in Latin America.

"Now for the episode today we feature one of the great entrepreneurs of the last two decades. He scaled his business from an idea at business school to a $78 billion market cap company, today operating in 18 countries with 320 employees by the end of this year."

The quote introduces Marcos Galperin as a successful entrepreneur who significantly expanded his business, Mercado Libre, in terms of market capitalization, operational reach, and employee base.

• The idea for Mercado Libre emerged during the dot-com boom in 1998 while Marcos was at Stanford.
• Frustrations about the lack of internet applications in Latin America and an acquisition of the company he was to return to led to the decision to create Mercado Libre.

"It was the crazy.com days, and I was doing my MBA at Stanford and having lots of discussions with friends regarding the possibilities that the Internet would bring to Latin America and also venting frustrations because there really weren't many applications running on the Internet in Latin America."

Marcos Galperin discusses the context in which the idea for Mercado Libre was born, highlighting the potential he and his peers saw for internet applications in Latin America during his time at Stanford.

• Marcos leads by example and relies heavily on his team.
• The team at Mercado Libre is a mix of long-time employees and newer members who have risen to high positions.
• Marcos emphasizes enjoying work and having a good time, even when working virtually.

"I would say I like to lead through the example. So I would say that's one of my guiding principles."

Marcos Galperin describes his management principle of leading by example, which is a core aspect of his approach to leading Mercado Libre.

• Marcos disagrees with the notion that talent is only suitable for certain stages of a company.
• He believes that some people can grow with the company, citing examples from the Bay Area and his own experience.
• The adaptability of an individual determines their fit for different stages of a company's growth.

"I think there are different people. Maybe there are people that are only for one stage of the company. And I've been with many entrepreneurs that say I like to start companies and once they grow after so many employees, I'd rather start a new company or go somewhere else."

Marcos Galperin expresses his view that individuals vary in their suitability for different company stages, suggesting that while some prefer early stages, others are capable of adapting and growing with the company.

• The transition from founder to CEO involved shifting from an operational role to a strategic one.
• Marcos's focus has always been on understanding industry and technology trends to direct the company appropriately.
• Building and motivating a great team to move in the right direction has been a constant.

"Obviously now my role is much more strategic, it's not operational and it's not so much on the day to day in terms of understanding the industry trends, the technology trends and how these trends will impact our company and our business, I think they remain the same."

Marcos Galperin discusses how his role evolved from being hands-on and operational to strategic and focused on industry trends, while maintaining the goal of guiding the company effectively.

• Marcos feels that it is still "day one" at Mercado Libre, indicating a persistent entrepreneurial spirit.
• He believes that despite the company's size, they are still at an early stage in ecommerce and fintech.
• Growth potential is tied to various risks, such as regulatory, industry, innovation, and platform risks.

"I still believe, even though we have built an amazing company that is very large with a lot of resources, both financial resources, but also in terms of, for example, we have a technology team of almost 8000 people, and this year we're going to end up with 30,000 employees. So with many resources, I still think that we are facing huge risks, huge opportunities."

Marcos Galperin reflects on the continued growth and opportunities for Mercado Libre, acknowledging the risks involved despite the company's significant resources and achievements.

• Marcos spends time understanding industry and technology trends and their impact on Mercado Libre.
• He focuses on understanding the business's performance across different countries and sectors.
• Marcos involves himself in decisions that interpret trends and understand business operations.

"I spend a lot of time, as I was saying earlier, trying to understand the industry trends and technology trends and then trying to interpret how those trends will impact our business."

The quote highlights Marcos Galperin's prioritization of staying informed about industry and technology trends to make strategic decisions for Mercado Libre's future.

• Marcos Galperin engages in both transcendental and routine decision-making processes.
• He remains flexible, involving himself in micro decisions in certain areas while stepping back in others where the team is performing well and no industry changes demand his attention.

"I keep my options open and I participate in both."

This quote highlights Galperin's hands-on approach to leadership, indicating that he does not restrict himself to only high-level decisions but is also involved in day-to-day operations when necessary.

• Founder CEOs' opinions carry significant weight within their companies.
• Galperin believes in working with teams that can challenge and argue against his opinions to avoid stagnation and ensure long-term success.
• He finds it more challenging to implement his own decisions due to the culture of open discussions at Mercado Libre.

"Well, definitely when you're a founder CEO, there is a lot of weight to the opinions that one has."

This quote acknowledges the influence founder CEOs have within their companies and sets the stage for discussing the importance of having a team that can provide counterpoints to the founder's ideas.

• Mercado Libre fosters an environment where team members are encouraged to make decisions and take risks without fear.
• Successes and failures are attributed to the team and process, not individuals.
• The company values perseverance and iteration, recognizing that initial ideas often require multiple iterations to succeed.
• Galperin contrasts the gradual growth of Mercado Libre with the rapid 'hockey stick' growth often seen in Silicon Valley stories.

"We try to create an environment where people are not afraid of making decisions and taking risks."

This quote emphasizes the company's commitment to creating a culture that promotes risk-taking and decision-making without fear of individual blame for failures.

• Resource allocation plays a significant role in deciding when to stop pursuing an idea.
• Mercado Libre has more ideas than resources, leading to tough decisions about which ideas to pursue.
• Ideas that have not worked after several iterations may be dropped in favor of new ones.

"Sometimes you're forced to do it because obviously, every year you need to allocate resources, and you have a certain number of resources."

Galperin explains the practical considerations of resource allocation that can force a company to abandon certain ideas in favor of others that may have a higher potential for success.

• Galperin experienced two significant market crashes: the dot-com bubble and the 2007 financial crisis.
• These events impacted fundraising, investor relations, and stock prices for Mercado Libre.
• The crashes reinforced the importance of focusing on key operating metrics rather than market volatility.

"I think the crash had a big impact on us."

The quote reflects on the profound effect that market crashes had on the company, shaping its approach to business and resilience.

• During market turmoil, Mercado Libre focuses on real business aspects like user growth and product traction.
• The company does not dwell on stock prices or market indexes, which helps maintain composure amidst fluctuations.

"We've always liked to focus on the real aspects of the business."

Galperin's quote illustrates the company's strategy of concentrating on core business metrics to stay composed during financial market crises.

• The crashes influenced Mercado Libre's culture and approach to business.
• Competitors focused on short-term gains were more negatively affected by the crashes.
• For Mercado Libre, these events highlighted the importance of building a sustainable organization with a long-term perspective.

"I think those crashes have had a big impact on our culture."

This quote ties the experiences of navigating market crashes to the development of Mercado Libre's enduring and resilient company culture.

• Marcos Galperin emphasizes a balanced approach to funding, advocating for adequate capital while minimizing dilution.
• Building the best possible product should be prioritized over spending excessively just because funds are available.
• Accessing funds when they are easy to come by is advised, but overfunding should be avoided to prevent unnecessary spending and increased dilution.

"Obviously you want to be well funded, but obviously you want to minimize dilution as much as you can." This quote underlines the importance of securing necessary funding while also protecting equity interests.

"You need to spend whatever is necessary to build the best possible product, and therefore you need to raise the money that you require for that." Marcos suggests that funding should be focused on product development rather than indiscriminate spending.

• Marcos advocates for focusing on one's own company's strengths, weaknesses, and opportunities rather than fixating on competitors' actions.
• Mercado Libre has built a unique combination of services, likened to a fusion of Shopify, PayPal, and a marketplace.
• The company's longevity and adaptability are attributed to focusing on internal growth and innovation rather than competitors.

"We like to play our game. We like to understand what are our strengths and what are our weaknesses and what are our opportunities." Marcos emphasizes the importance of self-awareness and playing to one's own strategic advantages.

"And I think that's the best way to be in this industry for many decades." He attributes the company's longevity to its focus on internal strategy and execution.

• Marcos views Mercado Pago's future potential as immense and beyond his imagination due to the compounding growth of fintech and defi.
• The success and growth of Mercado Pago are seen as indicative of broader fintech traction in the region and the western world.
• The synergy between fintech, Mercado Pago's growth, and the emergence of defi is expected to create numerous opportunities.

"I think Mercado Pago is already very big, but I think the potential for Mercado Pao in the next two, three decades is just beyond my imagination." Marcos expresses his belief in the vast potential for growth and impact of Mercado Pago in the coming years.

• Volatility in Latin America, including political and currency instability, is acknowledged as a barrier to creating long-lasting companies.
• The challenging environment can lead to a short-term mindset among entrepreneurs and difficulty in retaining top talent.
• Building a robust startup ecosystem requires stable conditions and infrastructure, which are hindered by regional volatility.

"Well, it certainly holds back the ecosystem because so much volatility makes it harder to create long lasting companies." Marcos acknowledges the negative impact of regional volatility on the business ecosystem.

• Marcos shares that Mercado Libre had opportunities to sell the company but chose to pursue independent growth.
• An offer in 2001 was declined, and a later agreement with eBay fell through, leading to an independent IPO.
• These experiences reflect the company's commitment to its vision and the resilience required to navigate the tech industry.

"Certainly no. We had several occasions when we entertained that possibility from the very early days." Marcos discusses past considerations of selling Mercado Libre and the decisions made to remain independent.

• Marcos reflects on the rapid changes in the tech industry and the need for long-term focus and adaptability.
• The company's willingness to venture into unfamiliar territories, such as logistics, exemplifies its commitment to innovation and growth.
• The story of the Lake Como retreat with eBay highlights the unpredictable nature of the tech industry and the importance of continuous learning and skill development.

"And I think it was the days when they were interested in having a larger share of Marco Libre and we were not that interested in becoming a part of eBay." This quote reflects the company's desire to maintain independence and control over its direction despite potential acquisition offers.

"And that's one of the reasons why we have, like five years ago, decided to go into logistics, for example, and we had no idea how to do logistics." Marcos illustrates the company's strategic decision to expand into logistics, showcasing its adaptability and willingness to learn new competencies.

• Marcos Galperin highlights the importance of an organization learning new skills to stay competitive.
• Developing new capabilities is seen as essential for success in the coming decades.
• Successfully learning and implementing new skills at scale boosts organizational confidence.

"But we understood that this was a capability that we needed to develop to be successful in the next decades. Otherwise we were not going to be able to compete successfully." "And it has also given us tremendous confidence, because once you understand that as an organization, you are able to put together your resources and learn a completely new skill, and you're able to do it at scale."

These quotes emphasize the strategic foresight of acquiring new capabilities to ensure long-term competitiveness and the empowering effect it has on the organization's confidence.

• Vertical integration is discussed as a strategic choice dependent on the business stage and the need for efficiency.
• Marcos Galperin uses fintech as an example, detailing the progression from payments to acquiring licenses and issuing credit cards.
• The goal of vertical integration is to reduce costs and pass savings to customers.

"So you start integrating vertically one way and the other, basically to try and reduce costs and transfer those savings to your user."

This quote succinctly captures the rationale behind vertical integration: to streamline operations and offer better value to customers.

• Marcos Galperin shares his perspective on personal wealth and its impact on his life.
• Despite increased comfort, he maintains a lifestyle similar to his neighbors and ensures his children have a grounded upbringing.

"But my day to day life is exactly the same as my neighbors, and my kids live exactly the same as the kids that go to school with them."

Galperin's quote reflects his effort to maintain a normal life despite his financial success, highlighting the value he places on a grounded lifestyle.

• Marcos Galperin admits to reading more news than books due to the demands of staying updated with his business.
• He mentions "Built to Last" and "Good to Great" as influential books that shaped his early business approach.

"I would say it's two build to last and good to great. I really enjoyed those books."

The quote indicates the lasting impact that certain books can have on an individual's business philosophy and strategy.

• Marcos Galperin discusses the challenge of planning his transition out of Mercado Libre.
• He focuses on ensuring the company maintains its entrepreneurial spirit and culture after his departure.

"I would say where I'm spending a lot of my energy is understanding what's the best way for me to transition out of Marco Libre and have Marco Libre continue to execute as well as it has executed in the last 22 years for the next 22 years."

This quote reveals Galperin's concern for the future of Mercado Libre and his deliberate approach to leadership transition.

• Galperin expresses his desire for his children to be persevering, willing to take risks, and to enjoy life's journey.
• He emphasizes the importance of enjoying daily life rather than fixating on a final destination for happiness.

"But above all, I would like them to understand that they need to enjoy the ride, that there's never an end destination, that is the one that provides you happiness, that you need to enjoy life every day."

The quote reflects Galperin's philosophy on life and success, which he hopes to pass on to his children.

• Galperin looks up to Jeff Bezos and Elon Musk for their risk-taking and long-term vision.
• He is skeptical about historical leaders due to potential misrepresentation but admires Winston Churchill.
• He notes a current deficit in great political leadership.

"So I would say in our industry and in our era, I obviously look up to Bezos and to Elon Musk a lot because of how they like to take risks and how long term oriented they are."

This quote identifies specific qualities in leaders that Galperin values and seeks to emulate.

• The next five years for Galperin may involve transitioning to a chairman role and ensuring Mercado Libre retains its culture.
• Success is defined by maintaining the company's entrepreneurial spirit and culture without his daily involvement.

"I think the next five years and the chapter of success for me would entail maybe transitioning out of my role to, I don't know, to a chairman role or something like that, and being able to see Mercado Libre with the same entrepreneurial spirit that it has today."

Galperin's quote outlines his vision for a successful future both for himself and Mercado Libre, focusing on preserving the company's core values.

• Harry Stebbings thanks Marcos Galperin for the conversation and acknowledges the journey shared.
• The discussion ends with a mention of banking services and tech team building platforms for startups.

"My pleasure, Harry. Thanks for the conversation and I hope you have a very nice day."

Galperin's polite farewell encapsulates the cordial and informative nature of the discussion.