Due diligence in fundraising is the method that fundraising teams use to vet potential fundraising due diligence donors. This helps nonprofits identify the potential risks that could impact their mission and image. It aids them in deciding whether or not to pursue a certain potential client. In today’s digital world embarrassing revelations can go viral fast and have lasting effects. A fundraising team needs to be able to recognize and evaluate potential risks as they occur, or risk embarrassing the organisation and potentially losing valuable resources in the form of time for staff and donations.
Investors conducting fundraising due diligence should be aware of the day-today business operations of your startup and the extent to which they are sustainable. This includes looking at the management team, sales and HR policies. Investors frequently conduct inspections on-site to observe the workplace and business culture.
It is crucial that you have the right funding procedure. Inadequate planning can lead to the failure of your fundraising goals and loss of investor confidence in your startup. Ensure you have a clear and consistent policy involving the workflow, decision-timelines and contacts and a communications outreach plan for your team.
Your donor screening tools should be able to automatically search across various online sources and confirm the identity, affiliations and interests of the donor. This will save you a lot of time and effort as well as give you comprehensive reports that are clear and easily reproduceable. It is also an excellent idea to create some red flags that your team should look for when examining potential clients. These could include international potential customers, unverified wealth sources, criminal activity or scandals and solicitations that exceed a certain dollar amount (including the naming gift).