Select Page

Anyone who has seen Shark Tank, Dragon’s Den or any other show where millionaire investors put startup entrepreneurs through their paces is familiar with the concept of due diligence. The idea is that no person in their right mind would ever put down money for an item or service about which they are not knowledgeable. It is vital to conduct fundraising with diligence. important.

Due diligence in fundraising is a process of document-gathering and data collection. It is important that founders provide documentation to support claims made during the pitch. They must also present the operation details and also disclose any possible investment risks. Having a clear idea of what is expected of information gathering can help speed up the fundraising process and ensure that all the necessary documents are in the hands of the investors.

The scope of fundraising due diligence is well-defined, however the specifics may differ based on the stage of growth of a company and the size of an investment round. At the stages of seed and angel, obligations on both sides of the table are small but as a business moves towards series A due diligence becomes more thorough.

A good way to go about this is to develop the risk matrix and system that identifies the types of prospects who require further investigation. For example, nonprofits should look at their policies on accepting gifts and devise a method for screening out donors with criminal histories or known scandals. They can also install donor tracking software to flag any media mentions of their largest donors, should there be any notable events.