You can see on Shark Tank and other business shows how a confident pitch can be ruined when the past of a prospect is disclosed. They might reveal a pending suit, a hidden https://eurodataroom.com/ credit card debt, or other issues that hinder the prospect from giving you money. Due diligence, also known as DD, is what teams of fundraisers do to safeguard their donors and potential donors from legal, financial, and reputational risk.
The documentation and depth of due diligence required for a process of fundraising varies depending on the stage of your startup. But, in general it’s an essential stage of the growth of your company, especially if you’re seeking the investment of venture capital funds.
Investors are interested in knowing about the significant risks that could hinder your company from achieving its maximum potential. Investors want to know the risk factors that could prevent your company from achieving its full potential.
Educational institutions and non-profit organizations also conduct due diligence on prospective donors to make sure they’re mission and values align with the philanthropic donations they’re seeking to make. They’ll also take into consideration how a donation will impact the organization and its leadership–and, in some cases the possibility that a certain project is at risk of being overwhelmed by an influence of the donor.
Developing a clear, consistent risk rubric to guide the due diligence process of prospective donors will help you streamline DD efforts and accelerate the timeframe for fundraising. This will help your business avoid having to restart following an unexpected setback or delay. In addition, keeping an area for data storage that is “DD ready” will help you reduce the cost of legal fees and will allow you to give potential customers all the information they need to make a decision.
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