Due diligence in fundraising is the process through which fundraising teams evaluate potential donors. This helps nonprofits recognize any risks that could impact their mission and reputation. It also assists them in making decisions on whether to pursue potential donors or not. In the digital age devastating revelations can be shared quickly and can have lasting consequences. A fundraising team must be able to spot and evaluate potential risks as they arise, or risk embarrassing the organization and possibly wasting valuable resources in the form of staff time and donations.
Investors who are conducting due diligence on your business will want be aware of how long-lasting the company’s operations are. This includes analyzing the management team, sales and HR processes. It is also typical for investors to make visits on the spot to see the working environment and environment firsthand.
It is vital to ensure that your fundraising process is in order, as delays can affect your fundraising goals and result in a loss of investor confidence in your startup. Make sure you have a consistent and clear guidelines for your team, including workflows, contact details, decision timelines and a communications outreach plan.
The tools you use to screen donors should be able to search automatically across online sources and verify the identity, affiliations and interests of the donor. This will save you lots of time and effort and provide you with reports that are easy to read and easily reproducible. It’s also a good idea for your team to create a list of red flags or triggers that they should be aware of when analyzing potential clients. These could include international potential customers and unsubstantiated wealth sources. criminal activity or scandals and solicitations for an virtual data room amount of money (including name gifts).