It is evident in Shark Tank and other business shows how a well-crafted pitch can be destroyed if the past of a prospect is disclosed. They could reveal an pending lawsuit, hidden credit card debt, or other issues that stop them from making a donation. Due diligence, also known as DD is the process that fundraising teams do to protect their donors and prospects from financial, legal and reputational risk.
The amount and depth of documentation requirements of a due diligence procedure differs depending on the stage of your startup click resources and the industry you’re in. But, in general it’s an essential stage of your business’s growth particularly if you’re looking for funding from venture capital funds.
Investors want to know the most significant risks that could hinder your company from realizing its full potential. Investors want to know the material risks that could prevent your company from reaching its full potential.
Educational establishments and non-profit organizations also conduct due diligence on prospective donors to make sure that their mission and values coincide with the charitable donations they are seeking to make. They will also assess the impact of a donation on an organization and its leadership and whether an individual project is in danger of being overtaken by a supporter.
Establishing a clear uniform risk rubric that will guide the due diligence process for prospective donors will allow you to streamline DD efforts and speed up the timeframe for fundraising. This will save your organization from having to start all over in the event of a setback that is unexpected. Additionally, having your data room “DD ready” will lower your legal fees and ensure that you give potential customers all the information they require to make a choice.