Anyone who has seen Shark Tank, Dragon’s Den or any other show on which millionaire investors put startups through their paces will be familiar with the concept www.eurodataroom.com/drooms-virtual-data-room-review/ of due diligence. The idea behind it is that no one in their right mind would put down money for something or a service about which they know nothing. Due diligence in fundraising is essential.
Due diligence on fundraising involves a process of documents and data gathering. It is crucial that founders submit documents to support claims made during the pitch. They must also show operational details and explain any possible investment risks. Knowing what is required of you in terms information gathering will help you accelerate your fundraising and ensure that all the documents are available.
The scope of fundraising due diligence is well-defined, however the specifics can differ based on the stage of growth of a business and the size of an investment round. At the seed and angel stages, obligations on both sides of the table are small, but as a company gets closer to series A due diligence becomes more stringent.
A good idea is to create an assessment of risk and a system to identify the types of people who require further research. For example, nonprofits should look at their policies on accepting gifts and create a process for screening out donors with criminal histories or known scandals. They could also set up donor tracking software that flags any media mentions of their biggest donors, when there are newsworthy incidents.