Due diligence in fundraising is the process that fundraising teams employ to vet potential donors. This helps nonprofits recognize any potential risks that may affect their mission or reputation. It allows them to decide whether or not to pursue a particular prospect. In today’s digital world the news of damaging information can be spread quickly and can have lasting effects. A fundraising team must be able determine and assess any risks that could arise. Otherwise they risk embarrassing their organization and losing valuable resources, such as time of staff and donations.

Investors conducting due diligence during fundraising will want to understand the day-to-day business operations of your startup and how long-lasting they can last. This includes analyzing the top management teams, sales and HR policies. Investors are often on-site to observe the work environment and the culture of business.

It is vital to make sure you are following the correct funding procedure as delays could reduce your fundraising goals and result in the loss of investor confidence in your startup. Ensure you have a clear and consistent policy involving timelines for workflows, decision-timelines, contacts, and a communication outreach plan for click resources your team.

Your donor screening tools should be able to search automatically through online sources and verify the identity, affiliations and interests of the donor. This can save you a lot of time and effort and provide you with comprehensive reports that are clear and easily reproducible. It’s also recommended for your team to create a list of indicators or red flags they should look out for when investigating potential prospects. This could include things such as foreign prospects, unsubstantiated sources of wealth, known crimes or scandals, and solicitations for more than a certain amount of dollars (including naming gifts).