Due diligence in fundraising is the method that fundraising teams use to vet potential donors. This allows nonprofits to identify the potential risks that could affect their mission or image. It aids them in deciding whether or not to pursue a certain opportunity. In the age of the internet, devastating revelations can be shared quickly and can cause lasting damage. A fundraising team should be able identify and investigate any potential risks that might arise. Otherwise they could be embarrassed by their organization and wasting valuable resources, such as time of staff and donations.
Investors who are conducting due diligence on your startup will want be aware of how long-lasting the company’s operations are. This includes examining sales as well as the top management team, and HR procedures. Investors frequently conduct inspections on-site to observe the working environment and business culture.
It is vital to make sure you are following the correct funding procedure as delays could affect your fundraising goals and lead to the loss of investor confidence in your startup. Make sure you have an organized and consistent policy involving deadlines for decisions, workflows, contacts and communication outreach plan for your team.
The tools you use to screen donors should be able to automatically search across various online sources and confirm identities, affiliations, and interests. This can save time and effort and provide complete reports that you can easily duplicate. It is also good to establish a list of red flags or triggers that your team must look for when examining potential clients. This could include things such as foreign prospects, unsubstantiated sources of wealth, a history of criminal activities or scandals and solicitations over an amount of money (including the naming of gifts).