Due diligence in fundraising is the method that fundraising teams employ to check potential donors. This helps nonprofits identify any potential risks that may impact their mission and reputation. It allows them to decide whether or not to pursue a particular prospect. In this digital age disclosures that are damaging can spread quickly and cause lasting damage. A fundraising team should be able identify and investigate any potential risks that might arise. Otherwise they risk embarrassing their organization and losing precious resources, such as time of staff 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 looking at the top management teams, sales and HR processes. Investors typically conduct inspections on site to observe the workplace and business culture.
It is important that you get your funding process right in order to avoid delays that could affect your fundraising goals and cause a loss of investor confidence in your startup. Make sure you have an organized and consistent process that includes workflows, decision-timelines, contacts, and a communication outreach plan for your team.
Your donor screening tools should be able to automatically search across the internet and verify identity, affiliations and interests. This will save you a lot of time and effort, and give you comprehensive reports that you are able to easily duplicate. It’s also a good 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. These could include international potential customers or sources of wealth that are not verified, criminal activities or scandals and solicitations for the amount of a certain amount (including name gifts).
