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Fundraising Due Diligence

If you watch Shark Tank or other business shows, you’ll see how a slick presentation and a confident appearance can suddenly be derailed when a prospective client’s history is exposed. They could reveal a pending lawsuit, a hidden debt or any other issue that stops them from giving you their money. Due diligence, also known as DD is what fundraising teams do to protect their donors and their prospects from legal, financial and reputational risk.

The depth and documentation requirements of a due diligence procedure differs depending on the stage of your company’s growth and industry. It is important to remember that this is a crucial phase in the development of your business, particularly when you’re seeking funding from venture funds.

Investors will want to understand the material risks that could prevent your business from reaching its full potential. This includes an exhaustive analysis of the company’s overall strategic plan, its resources, and your ability to meet funding goals.

Educational establishments and non-profit organizations also conduct due diligence on potential donors to ensure they’re mission and values coincide with the charitable donations they’re looking to make. They’ll also examine the impact of a donation on the organization and its leadership–and in some instances it is a matter of determining if a particular cause is at risk of being taken over by an influence of a supporter.

Establishing a clear uniform risk rubric that will guide the due diligence process for prospects can help you streamline DD efforts and speed up the timeframe for fundraising. This will prevent your organization from having to start in the event of a setback that is unexpected. Additionally, having an area for data storage that is “DD ready” will help you reduce the cost of legal fees and will allow you to provide prospects with all the information they require to make a choice.