Due diligence is a crucial element of the fundraising process but it can eat up precious time that should be used by the founders working on their business. It can be difficult to manage the continuous flow of requests from investors for information, which can cause delays in closing funding rounds.
The depth of fundraising due diligence varies depending on the stage of the startup, and also by investor type. For instance, a start-up company should be prepared to provide information to equity investors such as venture capital companies and angel investors, while companies at later stages may need to satisfy institutional investors by providing more thorough due diligence.
Utilizing tools to automate these searches can help reduce the workload on staff and reduce the amount of time required for fundraising due diligence. For example screening Discover More and prospecting for donors tools can automatically scan the internet for information regarding donors and their companies or associations. This can help save a considerable amount of time and effort compared to manual research, and ensure that all potential risk factors are covered.
Fundraising due diligence includes not just looking up information about potential investors but also establishing guidelines for the types of donations that institutions will accept or deny. These policies can include guidelines that prevent any influence a donor has on the institution’s staff or trustees or programs.