CNBC: What were the early days like?  Galperin: We founded the company in 1999, and then the first Internet bubble burst. Our growth rates were much lower than we said, but we had cut our burn rates, so we had money. So the investors said, "This is the one company that still has money. Let's shut them down and take the money out. The projections were that we were going to be profitable three years down the road.  We had to go to a shareholder vote (to stop the investors from shutting the company down).  Read MoreThe rise of the underdog million-dollar franchises  CNBC: Is that a cautionary tale for taking venture capital?  CNBC: What about the challenges of starting a business in Latin America without a developed infrastructure?  Galperin: Government regulations vary, and some laws are challenging. If you go bankrupt in Latin America, you can go to jail if you don't have enough money to pay severance to employees for six months.  At the same time, adoption of the Internet is at a slower pace. When we started, the Internet penetration rate was 3 percent. Of those, only 10 percent did e-commerce. We knew it was going to get to 100 percent. We knew people would eventually access the Internet through different formats, and that is what happened. Today everyone has a mobile phone. Now e-commerce penetration is 50 percent of Internet users.  CNBC: How do you keep the company from becoming bloated? How do you keep innovating?  Galperin: We have a culture that it's better to cannibalize ourselves than to have someone else cannibalize us. Since 2010, we have been working on a deep technology overhaul that is allowing us to switch from a closed and monolithic system to an open and decoupled one.  We are splitting MercadoLibre into many small cells. We decentralized the software development so that each of the separate business units could operate independently and be responsible for their own success.
MercadoLibre is the eBay of Latin America. The founder talks about how he built the largest regional retailer despite market challenges.