Due diligence is a crucial part of the fundraising process however it can consume time that founders should be focusing on their business. Additionally, it’s difficult to manage the influx of requests for information from investors, which could lead to delays in closing round of funding.

The extent of due diligence on fundraising varies by the stage of the startup, and by the type of investor. A seed-stage startup must be prepared to present information to equity investors, such as venture capital firms and Angel Investors, as later-stage startups may require to satisfy institutional investor due diligence.

Tools that automate these searches will reduce the workload on staff, and the time required for due diligence in fundraising. Donor prospecting and screening software, for instance can automatically search the internet for public information regarding donors, their businesses and associations. This can save a significant amount of time and effort compared to manual research, and can make sure that all risk factors are considered.

In addition to conducting searches to find out information about a potential investor as well as conducting due diligence on fundraising, it also includes establishing policies for the kinds of donations that an institution is willing to accept. These policies could contain guidelines to limit any influence a donor has on the institution’s staff or trustees or programs.