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Anyone who has seen Shark Tank or Dragon’s Den or any other program in which millionaire investors test startups is familiar with concept of due diligence. The idea behind it is that no person in their right mind would plunk down money for a product or service about which they have no knowledge. It is vital to conduct fundraising with diligence. essential.

Due diligence in fundraising is a procedure that requires gathering data and documents. It requires that founders provide supporting documents to justify the claims made during the pitch, demonstrate the operational nitty-gritty and expose any potential investment risks. Being aware of what is expected of information gathering can help speed up the fundraising process and ensure that all needed documents are readily available.

While the scope of fundraising due diligence is pretty well defined the specifics depend on the company’s stage of development and the size of the investment round. Due diligence obligations are small at the angel and seed stage however, they become more stringent as a company advances towards series A.

A good idea is to create a risk rubric and devise a method for identifying the types of potential donors that require further research. Non-profits, for instance, should review their policies on gift acceptance to determine how they filter out donors with criminal records or are involved in scandals. Additionally, they could install donor tracking tools which automatically flag mentions of their biggest donors in the case of newsworthy incidents.

https://eurodataroom.com/fundraising-due-diligence-checklist/