Due diligence is an essential element of fundraising however it can cause a loss of time that founders should be investing in their business. It’s also difficult to keep up with the constantly increasing number of requests from investors for information, which could result in delays in closing the funding round.
The amount of due diligence in fundraising is different depending on the stage of a start-up and the kind of investor. For instance, a seed-stage company must be prepared to disclose details to equity investors such as venture capital companies and angel investors, while companies at later stages may need to satisfy institutional investors through more rigorous due diligence.
Tools that automate these searches will reduce the workload on staff and the time needed for due diligence in fundraising. Donor prospecting and screening software, for instance, can automatically scan the Internet for public data on donors, their businesses and associations. This can save you a significant amount of time and effort when compared to manual research, and can ensure that all risk factors are addressed.
Due diligence in fundraising includes not just looking for information about potential investors, but also establishing policies regarding the kinds of donations institutions will take or not accept. These can include policies preventing from accepting donations of funds or property acquired through illegal means as well as guidelines that will prevent a donor from having influence over the institution’s trustees, staff or programs; and rules about naming eurodataroom.com policies.