Due diligence is an important aspect of fundraising however it can consume precious time that should be devoted by the founders working on their business. Additionally, it’s difficult to keep up with the number of inquiries from investors, which could result in delays in closing round funding.
The depth of due diligence for fundraising varies depending on the stage of a start-up and the kind of investor. A seed-stage company must be prepared to present information to equity investors like venture capital companies and Angel Investors, while later-stage startups may need to satisfy institutional investors due diligence.
Using tools to automate these searches can help reduce the workload on the staff and also reduce the amount of time needed to conduct due diligence on fundraising. For instance screening and prospecting for donors tools automatically search the web for data regarding donors and their companies or associations. This will save time and effort compared with manual research and ensure that all risk factors are covered.
In addition to conducting searches for information about potential investors due diligence in fundraising includes establishing policies for the kinds of donations that an institution is willing to accept. These policies can include guidelines that limit the influence of a donor over the institution’s staff, trustees or programs.
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