Fundraising Due Diligence

Fundraising Due Diligence

When you watch Shark Tank or other business shows, you’ll see how a smooth presentation and a confident appearance can suddenly be ruined when a prospect’s history is exposed. They may disclose a pending lawsuit, a hidden debt, or another issue that prevents them from donating their money. Due diligence, or DD is what fundraising teams do to protect their donors and potential donors from financial, legal and reputational risk.

The amount of documentation and due diligence required for a fundraising procedure varies depending on the stage of your startup. However, generally speaking it’s a crucial phase of the development of your company particularly if you’re looking for investment from venture capital funds.

Investors want to know about the material risks which could hinder your company from achieving its full potential. This will include a thorough review of your company’s strategic plan, existing resources and your capability to meet your funding goals.

Nonprofits and educational institutions also conduct DD on prospective donors to ensure that their goals and values align with the charitable contributions they’re hoping to make. They also look at the impact of a donation on the organization and its leadership and determine if any particular project is at risk of being overtaken by a supporter.

The creation of a clear, consistent risk rubric to guide the due diligence process of prospective donors can help you streamline DD efforts and accelerate timelines for fundraising. This will save your organization from having to start again after an unexpected setback. Having a dataroom that is «DD ready» can help reduce your legal costs and ensure that you are able to provide prospective customers with the data they require to make a decision.

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