Due diligence on fundraising is the method by which fundraising teams evaluate potential donors. This allows nonprofits to recognize potential risks that could impact their mission or reputation. It allows them to decide whether or not to pursue a particular prospect. In the age of the internet, the news of damaging events can be spread quickly and can have lasting effects. A fundraising team must be able to spot and investigate potential risks as they occur or risk embarrassing the organization and potentially losing valuable resources in the form of time for 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 analyzing the top management teams, sales and HR policies. Investors frequently conduct inspections on-site to observe the work environment and the culture of business.
It is crucial to make sure you are following the correct funding procedure, as delays can reduce your fundraising goals and cause the loss of investor confidence in your startup. Make sure you have a clear and consistent policy for your team, including workflows as well as contacts, timelines for decision making and a communications outreach plan.
Your donor screening tools should be able to automatically search across online sources and verify identity, affiliations, and other interests. This can save you lots of time and effort and provide you with reports that are easy to read and easily reproducible. It is also recommended to create a set of triggers/red flags that your team should be looking for when looking into potential customers. These could include international prospects, unsubstantiated sources of wealth, known criminal activities or scandals and solicitations that exceed an amount of money (including namesake gifts).
