If you watch Shark Tank or other business shows, you’ll notice how a slick presentation and a confident appearance can abruptly be destroyed when a prospective client’s past comes to light. They may disclose an pending lawsuit, hidden credit card debt, or other issues that stop them from granting you money. This is due diligence–or DD–and it’s what fundraising teams have to do to keep their prospects and donors safe from legal, financial and reputational risks as well as compliance.
The details and documentation requirements of a due diligence process differs based on the stage of your company’s growth and industry. But, in general it’s a crucial phase of your business’s growth particularly if you’re seeking the investment of venture capital funds.
Investors will want to understand the most significant risks that could prevent your business from achieving its full potential. Investors will want to know the risks that could hinder your business from reaching its full potential.
Educational institutions 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’re looking to make. They’ll also consider the impact of a donation on the organization and its leadership in some instances the possibility that a specific project is at risk of being overtaken by an undue influence from a supporter.
The creation of a clear, consistent risk rubric to guide the due diligence process for prospects will allow you to simplify DD efforts and speed up the timelines for fundraising. This will help prevent your business from having to start all over again after an unexpected setback. Additionally, having an area for data storage that is « DD ready » can help reduce the legal costs associated with it and will allow you to give potential customers all the information they need to make a choice.