Automating Fundraising Due Diligence

Due diligence is a crucial element of fundraising but it can also hinder the time founders should be spending on their business. It can be difficult to keep up the constant stream of investors’ requests for information, which could delay the closing of a funding round.

The level of fundraising due diligence varies by the stage of the startup, and also the type of investor. For instance, a seed stage company must be prepared to disclose information to equity investors like venture capital firms and angel investors, while later-stage companies might need to satisfy institutional investors through more rigorous due diligence.

Using tools to automate these searches can help reduce the workload on the staff and also reduce the amount of time required for due diligence in fundraising. For instance screening and prospecting for donors tools can automatically scan the web for public information regarding donors and their companies or associations. This will save a lot of time and effort compared to manual research, and can ensure that all potential risks are taken care of.

Due diligence for fundraising does not consist of just looking up information about a potential investor but also establishing guidelines for the kinds of donations institutions will take or not accept. These could include guidelines that prevent the giving of funds or property acquired through illegal means; guidelines that would prevent any donor from exercising influence over an institution’s staff, trustees or programs; as well as rules regarding naming policies.

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