Due diligence in fundraising is the method that fundraising teams use to evaluate potential donors. This helps nonprofits identify the potential risks that could affect their mission or reputation. It helps them decide whether or not to pursue a certain opportunity. In the digital age the news of damaging events can be spread quickly and can have lasting effects. A fundraising team must be able to determine and assess any risks that might arise. Otherwise they risk embarrassing their organisation and losing valuable resources like time and staff and donations.
Investors conducting fundraising due diligence will want to understand the day-to-day operations of your startup and how long-lasting they are. This includes examining sales, top management teams and HR policies. Investors typically conduct inspections on site to observe the working environment and the business culture.
It is important that you ensure that your fundraising process is in order because delays can hinder your fundraising objectives and result in a loss of investor confidence in your startup. Make sure you have a consistent and clear policy for your team, including workflows and decision timelines, contacts and a communication outreach plan.
Your donor screening tool should be able to search automatically across the internet and verify the identity, affiliations and interests of the donor. This can save you a lot of time and effort and provide you with comprehensive reports that https://eurodataroom.com/how-can-an-online-data-room-benefit-your-business/ are readable and easily reproduceable. It’s also recommended for your team to develop a list of red flags or triggers that they should look out for when looking into potential customers. This could include international clients or sources of wealth that are not verified, scandals or criminal activity, and solicitations over the amount of a certain amount (including naming gift).