Fundraising Due Diligence

You can see in Shark Tank and other business shows how a convincing pitch can be ruined when the past of a potential client is disclosed. They may reveal a pending suit, a hidden credit card debt or other issues that keep the prospect from giving you money. This is referred to as due diligence, or DD. it’s what fundraising teams must do to keep their potential customers and donors protected from legal, financial and reputational risk as well as compliance risks.

The depth and documentation requirements of a fundraising due diligence process can vary based on the stage of your startup and industry. It is crucial to keep in mind that this is an important stage in the development of your company, especially in the event that you’re looking to raise capital from venture capitalists.

Investors want to know the dangers that could stop your business from reaching its full potential. Investors will want to know the risk factors that could stop your business from reaching its full potential.

Educational establishments and non-profit organizations also conduct due diligence on prospective donors to ensure that their values and mission are in line with the philanthropic contributions they’re seeking to make. They will also assess the impact of a gift on the organization and its leadership as well as whether any particular project is at risk from being taken over by a donor.

Developing a clear uniform risk rubric that will guide the due diligence process of prospective donors will allow you to streamline DD efforts and speed up the timelines for fundraising. This will save your organization from having to start all over following an unexpected setback. In addition, keeping a data room “DD ready” will help you reduce your legal fees and ensure that you provide prospective clients with all the information they require to make a decision.