You can see in Shark Tank and other business shows how a well-crafted pitch can be ruined when the past of a prospect is revealed. They might reveal an pending lawsuit, a hidden credit card debt or other issues that keep them from making a donation. Due diligence, also known as DD is the process that teams of fundraisers do to safeguard their donors and their prospects from legal, financial, and reputational risk.

The amount and depth of documentation requirements of a fundraising due diligence process differs based on the stage of your startup and industry. It is crucial to keep in mind that this is a crucial phase in the development of your business, especially in the event that you’re looking to raise capital from venture capitalists.

Investors want to know about the risks that could hinder your company from reaching its maximum potential. Investors will want to know the risks that could stop your business from realizing its full potential.

Nonprofits and educational institutions also conduct DD on prospective donors to ensure that their mission and values are aligned with the philanthropic donations they’re seeking to make. They will also assess the impact of a donation on an organization and its leadership as well as whether the project is at risk of being taken over by a donor.

Developing a clear uniform risk rubric that will guide the due diligence process for prospects will allow you to reduce DD efforts and speed up the timelines for fundraising. This will save your organization from having to begin all over in the event of a setback that is unexpected. Additionally, having an area for data storage that is “DD ready” will reduce the cost of legal fees and ensure that you provide prospective clients with all the information they need to make a decision.

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