1,000 Entrepreneurs: Sara Castillo and Katie Castillo Wilson on Ads People Actually Want

Profile of sisters and co-founders of TapOnIt

Apr 16, 2020

Since 2015, Sara Castillo and Katie Castillo Wilson have worked hand in hand to build their company TapOnIt from the ground up. Creating their own tech hub in Iowa, the two sisters have created a new solution for ads. Delivering ads via text message and seeing open rates upwards of 98%, they have created a database of 300,000 people with 1,400 new members joining organically every month.

The company expects to hit one million users by the end of September, yet their branded product is not their only product. They also offer a SaaS solution for larger companies so that they can utilize visual advertising on mobile devices. This has allowed for TapOnIt to see subscribers in all 50 states.

Background

Prior to starting the business, Castillo Wilson was working as a digital advertising director for a news network. During her time there, she developed a love for creating effective marketing plans and helping small businesses grow their brands. At the time, small businesses were emerging into the digital sphere and she knew there was something that needed to be done.

She reached out to her sister, who was working in the music industry doing promotional advertising and bartending on the side “to actually make money,” said Castillo. Together they looked at how they could create a business that would allow companies to advertise with mobile devices in an increasingly connected world.

Theorizing an enterprise level SaaS solution, the two found that mobile devices could be targeting most easily through text messages. At the time, text message advertising existed as “black and white bubbles” that did not engage the user. The sisters decided that they could do better. By using visual advertising to expose people to local opportunities, they could drastically increase engagement.

First year

Castillo Wilson, the mother of two, would quit her job in June of 2014 and alongside her sister would set out to make TapOnIt a reality. The first step was working with local businesses. The two put themselves in front of as many people as possible. They put up flyers and handed out koozies at baseball games. With their boots on the ground efforts, they were able to secure $1 million from local businesses.

Around the same time, Castillo Wilson was approached by a local business owner to help with their sales and advertising. She proceeded to sit down with the main investor of the company and quickly realized she was not interested in the business. After politely declining the opportunity, the investor, known as Jim, asked what she was truly looking to do. Castillo Wilson ended up pitching the idea for TapOnIt. He saw the potential and became the first official investor in the company.

Initial struggles

With local fundraising and an investor, it would seem that TapOnIt was set for success. However, as for many companies, money would be their biggest issue. A SaaS solution was going to be a successful idea, but they needed to fund it first. The duo needed to find a way to generate revenue or else the company was going to run out of money. This would birth the idea for a branded product and the localized mobile ads that TapOnIt is known for.

Offering localized ads from small businesses created a consistent revenue stream for the company and alongside these partners, the company would begin to develop a loyal database of users. This database could further be marketed to businesses and the company would see it grow to half a million active users.

While money is a problem that all entrepreneurs encounter, the sisters would run into an unforeseen issue. Around six months into their new venture, after countless flyers and boxes of branded merchandise, the company was served a cease and desist order. While now known as TapOnIt, the company originally called themselves JumpOnIt, a name that was already trademarked by an East Coast company.

Against her lawyer’s advice, Castillo Wilson flew out to meet with the company in hopes of settling the issues. She explained what their company was doing and that she would like to find a peaceful solution. JumpOnIt liked the business that they had created and would allow the use of the name, if they paid royalties. The sisters changed the name and TapOnIt is now seen as a better, and more accurate, name for their company.

Success

Focusing on their customers rather than the companies they work with, TapOnIt has created a core group of active users who swear by their product. Alongside incentives to share ads to get new opportunities, the users are mostly responsible for the growth of the business. Customers constantly refer their friends and family to the platform thanks to advertisements that actually interest them.

Alongside seeking out ads that people actually want, the sisters are adamant about maintaining the quality of their ads. They understand that their messages could quickly end up like the spam mailbox of an email server. By maintaining these clear standards, they are able to reach high levels of involvement and response from their customers.

Furthering their successes, the company as a whole has remained extremely lean throughout its existence. Instead of relocating to a tech hub on either coast, the company stays true to its roots, operating out of Iowa. “We like to brag that our 3,000 square foot office costs us $3,000 a month,” Castillo Wilson said.

They focus the majority of the money they make into investing in new sales representatives. This allows them to have boots on the ground in small local markets to keep a finger on the pulse of the community. At the same time, they also have people working with enterprise level companies for national expansion.

For these companies, the savings they experience are well worth working with TapOnIt. Their closest comparison would be direct mail advertisement. Generally for direct mail, a postcard would cost a company around 25 cents to mail to a customer. In comparison, TapOnIt charges a fee per customer of anywhere between 9 cents and 15 cents. In the process, all those postcards are kept out of the landfill.

Future

Looking toward the future, the sisters are excited to continue to expand their business. Currently, they have active users in 40 markets across 17 different states. While they have customers in all 50 states, they do not currently offer deals for all of these people. Granted, they do have access to national offers.

With their current expansion efforts comes the need for more money. TapOnIt expects to go through another round of fundraising this year to continue to support their expansion.

In the end, they know that they have accessed an extremely successful market that was previously untapped. Moving forward, they will continue to be dedicated to their customers. At the same time, their customers remain loyal to their services, going so far as to say, “It could be called CrapOnIt for all I care as long as you keep sending good ads,” according to Castillo Wilson.

Question and answer:

GuruFocus: Were there any big breakthroughs?

Castillo Wilson: Being in Iowa the whole go out and raise money, VC, side of things was not nearly as prevalent as it was in other areas.

Castillo: Being female has been harder too. It is something like 2% of VC funding goes to female-founded companies. So we have had kind of a harder start being a female-founded company in Iowa, you know the tech hub of the United States.

Castillo Wilson: We are hispanic and I am a single mom.

Castillo: I am left handed. We have so many things against us.

Castillo Wilson: But instead of trying to go out and just raise money right away, we really focused on revenue. Once we validated the model, we knew what was working and were ready to start growing faster, that is when I really did start to focus on raising money. It was really hard. Honestly, people did not get it. In December of 2017, Sara and I went to New York. We were out there for about a week and I had a couple of VC type pitches lined up. We were going to be meeting with GateHouse and their investment group New Media Investment. It was the Thursday of that week that I had my pitch with New Media Investment Group and the next day we had a flight. We were at the airport getting ready to board the plane and I checked my email and we had a term sheet.

GuruFocus: Can you share how much money you have raised total?

Castillo Wilson: Yeah, so I raised a million in the first year. We raised $2 million from New Media Investment Group in January of 2018 and we are actually raising money right now. We are raising a round of convertible notes just to hit some major milestones and then we will work on a Series A midway through the year. So I have raised a total of $3.85 million. Our revenue also has doubled year over year, so we have been able to grow on more than just raising money.

GuruFocus: What are you most grateful for at this point in time?

Castillo: I am grateful for the opportunities. Sometimes I try to think about what I would be doing if we had never started this company. I have absolutely no idea. I could be doing something incredible or I could still be trying to figure out exactly what I want to do and so I am grateful for the opportunity to be doing something that I know I love to do. It is growing and the options are limitless as to what we can do. The opportunities are amazing. The things that we have gotten to do are amazing.

Castillo Wilson: We went dogsledding this last weekend.

Castillo: Yeah, we were in Canada last week for this absolutely incredible summit and stayed an extra day to have some fun time and we got to go dogsledding in the mountains of Canada. It was so cool.

Castillo Wilson: It was awesome.

Advice for entrepreneurs:

Create a solid network around you:

Going out and starting a business is not easy. There will be times where you fail. You will find yourself stuck in a hole. Surrounding yourself with support is going to help you tremendously. Find people that will believe in what you are doing and that you can rely on when you are in these situations. There is no need to do things alone.

Raise more money than you ever thought you would need:

The process of funding your company is going to take significantly longer than you think it will. To further complicate things, you are going to need double if not triple what you think you need. Be as conservative with your predictions as possible. Expect high expenses and low profits and prepare yourself to operate your business as lean as possible. It is much better to over-deliver.

The easiest thing to do is quit:

If you want your business to be a success, you have to make it happen. There will be times when you want to quit and the easiest way to move forward will be to give up. You have to keep pushing forward. If you have the vision for success, you will find it. Things will always be darkest before dawn. You will find success after failure. There will be scary times. Know that what you are doing is hard. You will come out on the other side stronger than before.

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Watch the video of the entire interview here: