Due diligence in fundraising is the method that fundraising teams use to assess potential donors. This helps nonprofits recognize any potential risks that may impact their mission and reputation. It allows them to decide whether or not to pursue a particular prospect. In today’s digital world, damaging revelations can spread fast and have lasting effects. A fundraising team should be able determine and assess any potential risks that may arise. Otherwise they risk embarrassing their organization and losing precious resources such as staff time and donations.
Investors conducting fundraising due diligence will need to know the day-to-day operations of your company and how long-lasting they are. This includes examining sales and the top management team, as well as HR processes. Investors often conduct on-site inspections to observe the workplace and the business culture.
It is vital to get the funding process right. Delays can lead the failure of your fundraising goals and decrease in investor confidence in your startup. Make sure you have a clear and consistent policy for your team, including workflows decisions, decision timelines, contacts and a communication outreach plan.
The tool you use to screen donors should be able search across websites to verify the identity, affiliations, and interests. This can save time and effort, as well as give you detailed reports that you are able to easily duplicate. It’s also recommended for your team to create a list of indicators or red flags they should be aware of when looking into potential customers. This could include international clients and unsubstantiated wealth sources. criminal activity or scandals, and solicitations over the amount of a certain amount (including naming gift).
