If you watch Shark Tank or other business shows, you see how a smooth pitch and confident appearance can suddenly be derailed when a prospect’s past is revealed. They may reveal the pending litigation, a hidden debt or some other issue that prevents them from giving you their money. Due diligence, also known as DD is what fundraising teams do to protect their donors and their prospects from legal, financial and reputational risks.
The requirements for documentation and depth of a fundraising due diligence process can vary based on the stage of your company’s growth and industry. However, generally speaking it’s a crucial phase of your company’s development, especially if you’re seeking funding from venture capital funds.
Investors want to be aware of the most significant risks that could prevent your business from achieving its full potential. Investors will want to be aware of the risks that could stop your business from achieving its full potential.
Nonprofits and educational institutions also conduct DD on prospective donors to ensure that their mission and values are aligned with the charitable contributions they’re hoping to make. They’ll also consider how a gift will affect the organization and its leadership–and, in some cases, whether a particular project is at risk of being swept away by an improper influence from an individual donor.
Developing a clear and consistent risk rubric to guide the due diligence process for prospective donors will allow you to streamline DD efforts and speed up the timelines for fundraising. This will save your organization from having to begin all over with a new approach after an unexpected setback. Keeping a dataroom that is “DD ready” can cut down your legal https://eurodataroom.com/ costs and ensure that you are able to provide prospects with the information they require to make a choice.
