When you watch Shark Tank or other business shows, you see how a slick pitch and a confident appearance could suddenly be ruined when a prospect’s history is exposed. They may reveal a pending suit, a hidden credit card debt, or other issues that prevent them from giving you money. This is referred to as due diligence, or DD. it’s what fundraising teams have to do to keep their potential customers and donors protected from legal, financial, reputational and compliance risks.
The documentation and the depth of due diligence required for fundraising varies depending on the stage https://eurodataroom.com/the-flexibility-that-will-be-functional-with-a-virtual-data-room/ of your startup. However, generally speaking it’s a crucial stage of the growth of your company particularly if you’re seeking funding from venture capital funds.
Investors will want to understand the most significant risks that could hinder your business from achieving its full potential. This includes an exhaustive review of your company’s strategic plan, existing resources and your capability to meet funding goals.
Educational institutions and non-profit organizations also conduct DD on potential donors to ensure that their goals and values align with the philanthropic donations they’re hoping to make. They will also assess the impact of a gift on an organization and its leadership, as well as whether the project is at risk of being surpassed by a donor.
Making a consistent, clear risk rubric that will guide the due diligence process when dealing with prospects will help streamline your efforts and accelerate fundraising timelines. This will allow your company to avoid having to start over following an unexpected setback or delay. Additionally, having an area for data storage that is «DD ready» can help reduce the legal costs associated with it and allow you to provide prospective clients with all the information they require to make a choice.