Fortunately, the pair found Koret Israel Economic Developement Funds (KIEDF) and Chocolate Orangatang Limited was born.
KIEDF, a non-profit organization located in Israel's Negev Desert, provides financial aid through loan guarantees to small businesses and high-tech firms run by young Israelis and Soviet immigrants. In the case of Chocolate Orangatang, a loan guarantee enabled the chocalateers to train in Belgium, buy a freezer, delivery vehicle and other equipment and hire an Ethiopian immigrant. The company plans to hire another employee in the near future.
Chocolate Orangatang's sweetly successful startup gives shape to KIEDF's mission: By providing loans to budding firms, the program aims to encourage economic development and new jobs — mainly in Israel's Negev region, which has a high concentration of both immigrants and unemployment.
Since the program began in April, under the direction of American-born investor Carl Kaplan and with much of its financing from San Francisco's Koret Foundation, KIEDF has generated nearly $5 million worth of loans for more than 90 firms.
Kaplan, who immigrated to Israel, discusses the financial project in almost militaristic terms. His goal, he says, is to foster the most "efficient deployment of philanthropic dollars" in Israel.
With an adminstrative overhead of less than 3 percent, KIEDF has a sizable head start on efficiency, working out of a small office with only Kaplan, one full-time employee and several part-time consultants to administer the loans.
But where KIEDF really stretches donated dollars is in their financing. In the case of Chocolate Orangatang, for example, a KIEDF loan guarantee of about $5,000 allowed the company to borrow almost $24,000 from the Israeli Bank Otzar Hahayal, with whom KIEDF has a partnership. The proceeds of that loan were then used to build the 25 percent equity needed to qualify for a $26,667 loan from Israel's Small Business Loan Fund. Similar loan structures allow scientists enough capital to qualify for Chief Scientist Grants from the Israeli government.
According to Kaplan, this kind of leveraging allows KIEDF to provide about $6 of financial assistance for every $1 of philanthropic money to businesses ranging from aerospace research labs to dental clinics and automobile repair shops.
KIEDF loan guarantees allow enterpreneurs to secure loans though banks might consider them "risky" recipients. KIEDF also arranges bank loans at the lowest possible interest rates, says Kaplan, and provides an initial grace period, usually six months, to repay the loan.
Kaplan says he is attempting to give new businesses every chance to succeed. These days, he is also trying to expand the number of loans the program can guarantee.
That mission brought him to the Bay Area and other American cities last month, meeting with partners and "potential partners" for the Negev program.
"Now, we're operating in a passive mode. I'm not aggressively advertising and promoting the program," says Kaplan.
Now he hopes more financial partners will enable him to dole out as many loans as needed, and "hopefully operate the program for many years."