Due diligence is a key element of fundraising however, it can consume time that founders should be investing in their business. In addition, it’s often difficult to keep up with the flood of requests for information from investors, which can lead to delays in closing the funding rounds.

The level of due diligence for fundraising varies according to the stage of a company’s development and the kind of investor. Seed-stage startups must be ready to present its information to equity investors like venture capital firms and Angel fundraising due diligence Investors while later-stage startups might need to satisfy institutional investor due diligence.

Tools that automate these searches will reduce the burden on staff and the time required for due diligence in fundraising. Donor screening and prospecting software, for instance, can automatically scan the web for data on donors, their businesses and associations. This can save you a significant amount of time and effort compared to manual research, and ensure that all potential risk factors are addressed.

Due diligence in fundraising includes not just looking up information about potential investors, but also setting up policies on the kinds of donations institutions will accept or reject. This could include policies that prohibit the giving of money or property by means other than legal or by a means that prevents a donor from having influence over an institution’s trustees, staff, or programs; and regulations regarding naming policies.