Fundación Botín is not your usual endowment-spending foundation. What makes it different? a) Size - it holds slightly less than 1% of all shares in the Spanish banking empire, Santander; b) Investment strategy - it doesn’t have one, it only holds Santander shares; and c) Philosophy - it’s constantly innovating, despite the temptation for a 51-year-old foundation to follow the status quo.
So when Life Length, a start-up biomedical company it supported, had unsuccessfully raised external funding in 2010 the banking family’s foundation took an unusual step - it bought a 65% equity stake in the company for €500,000.
“We decided ‘okay, let’s do it ourselves’. Let’s become, as a foundation, the first investors in this,” says Iñigo Sáenz de Miera, the director general of Fundación Botín.
“One of the problems of science in Spain is that we have a much higher level of scientific production than the level of technology transfer,” says Sáenz de Miera.
Life Length was a classic example of good research that had unfulfilled commercial potential. By the late 2000s its lead researcher Dr Maria Blasco had developed telomere analysis technology to measure thepercentage of short telomeres in individual cells (telomeres are part of chromosomes, and shortened telomeres are connected to many ageing-related diseases). This process can determine biological age, rather than chronological age. With the help of the foundation, Blasco and her colleagues defined what could be done with the technology, developed a business plan, and undertook a market study. With the initial €500,000 (which has since risen to €570,000) Fundación Botín helped find a manager and developed its business plan.
“It worked, and one year after, we decided to create the Mind the Gapprogramme as it is today and to detect other programmes like this one, other ideas,” says Sáenz de Miera.
The Mind the Gap programme takes academic, intellectual property and converts it into market-ready products by taking an equity stake in a company. Its prototypes were Life Length and another biotechnology company, DREAMgenics (“the names are important, it has to be a sexy name”, jokes Sáenz de Miera).
“I think it’s important we put in the money, but we put it in equity. This is the really new thing, because we are a social foundation, but we put it in equity.”
Today Life Length has created 20 jobs (and seven indirect ones), operates in 20 countries with accumulated turnover of €1.25 million from 2011 to 2014 and has raised another €5.2 million from private investors.
Fundación Botín involvement with Life Length underlines one of its defining characteristics: the family’s hands-on approach.
“The involvement of the family is high. They are part of the board, which meets four times a year. All of them, with their own interests are involved in different programmes,” says Sáenz de Miera. The board membership bears this out. When Emilio Botín died suddenly last September, media focussed firmly on the succession of his daughter Ana Patricia to the helm of the banking empire. What received less focus was succession at the family foundation, where fourth-gen Javier Botín replaced his father as chairman. Fellow Botín family members are Jaime, Emilio, Alfonso, Carolina, Paloma, and Carmen, as well as Ana Patricia.
Acknowledged as Spain’s top private foundation in terms of the volume of its social investments, Fundación Botín was created in 1964 by Marcelino Botín Sanz de Sautuola and his wife Carmen Yllera, to "mitigate the needs and promote the social development" of Cantabria. What started out as a focus on the Spanish region surrounding Santander has today grown to employ more than 40 people operating throughout the Iberian Peninsula, and Latin America. In the past 10 years the foundation has invested more than €300 million in social programmes.All this is made possible by its endowment made up solely of Santander shares. At present the foundation holds slightly less than 1% of the banking empire, equating to more than €900 million, which generates annual dividends of between €25-35 million. Spanish foundations must, by law, distribute 70% of this annual income and are only able to reinvest 30% to grow their endowment. In 2013 spending stood at €53 million, which was repeated in 2014 due to the construction of the Botín Centre in the heart of Santander’s waterfront – a project that has attracted praise and some criticism (a Bloomberg article on the centre, published last year, quoted an architectural professor who said the white ceramic building was too overbearing for the landscape, and a local lobby group suggested it was a vanity project).
Having this amount of money to spend every year has meant a very different approach to many endowment foundations, explains Sáenz de Miera. “We do not give the money away to other institutions. We do the social work ourselves. We do intervene and do act in society in order to generate this wealth. We believe that the way to generate wealth is detecting people with creative potential and betting on them to convert this potential in to wealth.”
These wealth-generating action programmes are centred on four core initiatives: education, science, rural development and the Botín Centre. Add to this a social action programme that targets people and groups in Cantabria with urgent needs by providing them aid, and the Madrid-based Trend Observatory, which focuses on education, science, and the environment – chiefly water and energy management.
The foundation’s education initiative, in particular, has had a dramatic impact over the past 15 years – focusing on developing the social and emotional intelligence of students, rather than purely cognitive intellect. Custom designed, the foundation steered the research, testing and development of the programme.
“Cognitive intelligence is not the most important aspect to being happy and successful,” explains Sáenz de Miera. “It’s much more important to be able to manage your emotions and relationships with others, what we call social and emotional intelligence.” Developed in conjunction with Yale University and universities in Spain, the programme is already implemented in 200 schools across the country. Extending the curriculum into Portugal is being explored with the Calouste Gulbenkian Foundation - one of the country’s largest charitable organisations.
The foundation’s Mind the Gap programme in science has adopted the same ‘hands-on’ approach to commercialising scientific discoveries.
Overall Fundación Botínhas invested €1.9 million in six biotech projects since 2010 with the aggregated value of Mind the Gap portfolio standing at €34.4 million to 31 Dec 2014 – a seven-fold increase in value. These companies have created 29 direct jobs and have brought five products to market with a total turnover of €370,000 in 2014.
Not all of the foundation’s investments have come off. It backed the development of a new drug with one of its companies, Axontherapix, but after several years decided to close the funding. “In this kind of area we are not able to fill the gap. It’s too big,” he laments.
These investments are a mix between social and financial investment, says Sáenz de Miera, although the foundation has a very clear boundary demarcating the two.
“In the first moment that an external investor, which is not a social foundation, puts in money, we cannot put in any more money. It’s a criteria we made. If someone else invests, it means that already the financial equation works.”
What then is Sáenz de Miera’s view on impact investing – a movement that’s attracting increasing attention, and disciples? “I think it’s exciting because we are all thinking about it. Speaking of new things is really good, even if I don’t see at the present moment the immediate, short-term consequences.” However, he reiterates this need for a clear delineation between financial and social returns. “If it’s financial, be clear that the investment is primary financial. Your obligation is that it works from the financial point of view. And then, wow, if it can be social that’s perfect. But the problem would be if you are not clear. Which is the primary objective?” he cautions.
This razor-sharp focus on objectives is one of the reasons Fundación Botín and its Science programme was selected as a case study for a guide on managing and measuring impact by Asociación Española de Fundaciones (AEF/Spanish Association of Foundations). Eduardo del Río, who is responsible for training/research at AEF, visited Fundación Botín to see how they do things for the case study.
“[Fundación Botín] found that as important as the money being invested in science and research, was to assure links between research and the market. So they decided to prioritise the creation and improvements of these links says del Rio. “It was a very interesting way to identify an objective that would really make a difference. Thinking, before acting.”
Fundación Botín is recognised as a leader among Spanish foundations not only because they have many years of work behind them, but because of the quality of the programmes where they donate money and their results, says del Rio.
“Even though they have this long tradition which offers them experience, they are not old in their thinking. They are very young in the way they approach problems. They innovate and try to challenge the status quo. They say: “This has been done like this, why continue when it doesn’t work? Why don’t we give thought to do it better?”
How then has the foundation changed after Emilio Botín’s death? Has there been a change in focus? “[Emilio] was involved in everything, and Javier he is also very much involved. The succession? It just happened,” says Sáenz de Miera.“Emilio Botín was a very special person with a huge involvement and a very special intensity. But nothing has changed. The priorities are the same. The bed of the foundation, in the programmes of the foundation, the strength with which the board helps the team of the foundation, how they support us, everything is the same.” In both business and philanthropy, the Botin’s succession has been seamless – a model for other families.