Fundraising Due Diligence – How Tech Can Help

Investors conduct due diligence during fundraising to ensure that they are investing in a company that has the best chance of success. It involves looking over financials, projections and legal papers to mitigate any risk of loss. Due diligence in fundraising is designed to make investors feel confident in the team and founders of the company they are backing.

While the scope and depth of due diligence varies by different stages of a start-up every company should have a thorough due diligence for fundraising procedure in place. This is a crucial aspect of ensuring the integrity of the company’s reputation. It also can stop scandals from breaking after the investment has been made.

In the age of digital the news cycle is fast and can cause lasting impact on the image of a company. It is therefore crucial to have an effective screening process that is able to detect issues and prevent them from escalating to larger public stories or scandals.

The decision to invest in a company that has any reputational risk is not worth the risk, and fundraising due diligence research should always be conducted prior to the time an investor makes a decision to invest their money. The amount of work and time it takes to conduct fundraising due diligence is often prohibitive for smaller teams. This is where technology can be of assistance.

Automating the process, researchers can be relieved of the chore of searching for sanctions lists and identifying red warning signs. This allows teams to concentrate on identifying the most promising candidates and expanding their donor database.

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