Due diligence on fundraising is the process by which fundraising teams scrutinize potential donors. This allows nonprofits to recognize the potential risks that could affect their mission or image. It aids them in deciding whether or not to pursue a particular opportunity. In today’s digital world embarrassing revelations can go viral quickly and can have lasting effects. A fundraising team must be able to discern and evaluate any potential risks that might arise. Otherwise they could end up embarrassing their organisation and losing valuable resources, such as time of staff and donations.
Investors conducting fundraising due diligence should be aware of the day-to-day business operations of your company and how sustainable they are. This includes analyzing sales, top management teams and HR policies. It is also typical for investors to make visits on the spot to see the working environment and environment firsthand.
It is important that you have your funding process in place in order to avoid delays that could eat into your fundraising goals and lead to an erosion of investor confidence in your startup. Ensure you have an organized and consistent policy with the workflow, decision-timelines and contacts, and a plan for communication outreach for your team.
Your donor screening tools should be able to search automatically across the internet and verify identity, affiliations, and other interests. This will save time and effort and provide you comprehensive reports that can easily replicate. It’s also a good idea for your team to make a list of red flags or triggers that they should keep an eye on when looking into potential customers. This could include things like foreign prospects, unsubstantiated sources of wealth, a history of scandals or virtual data room criminal activity, and solicitations for more than an amount of money (including the naming of gifts).