Due diligence in fundraising is the process by which fundraising teams evaluate potential donors. This enables nonprofits to identify the potential risks that could affect their mission or reputation. It also assists them in making decisions on whether to pursue a potential donor or not. In the digital age embarrassing revelations are quickly spread and can have lasting effects. A fundraising team must be able to recognize and investigate potential risks as they occur, or risk embarrassing the organization and potentially losing valuable resources in the form of staff time and donations.
Investors conducting fundraising due diligence will want to know about the day-today business operations of your company and how long-lasting they can last. This includes examining sales, the top management team, as well as HR procedures. It is also common for investors to conduct visits on the spot to see the work environment and culture in person.
It is important that you have your funding process in place in order to avoid delays that could affect your fundraising goals and lead to the loss of investor confidence in your startup. Ensure you have an organized and consistent policy with timelines for workflows, decision-timelines, contacts and communication outreach plan for your team.
Your donor screening tools should be able to automatically search across online sources and verify identities, affiliations, and interests. This will save you a lot of time and effort, as well as give you detailed reports that you can easily duplicate. It’s also an excellent idea for your team to make a list of red flags or triggers that they should be looking for in their research of potential buyers. This could include international clients, unverified wealth sources, scandals or criminal activity, and solicitations that exceed an amount of money (including naming gift).