Donor due diligence:

Fundraising Due Diligence Procedures


How to update your policy

Fundraising has seen a mass upheaval in recent years due to changes brought on by the pandemic, which has made it harder to build relationships in person. 49% of charities surveyed in 2021 lost fundraising income and many remain uncertain even as things returned to “normal.”

But while COVID-based restrictions have lifted, organisations should not rush to return to their old ways of fundraising. If anything, the pandemic has accelerated developments that were already underway and should be retained. Practices were shifting due to the ongoing changes and opportunities brought about by the ever-increasing amount of publicly available online data.

Donor Due diligence research is not just about the important task of limiting reputational and operational risk. It can also help you understand where further opportunities may lie and what relationships may be possible. In difficult times, smart use of these insights can mean the difference between success and failure. 

The importance of collecting and digesting publicly available data on potential prospects, partners and associates therefore continues to grow. In the following steps, we’ll outline the procedures nonprofits must consider to ensure that their fundraising due diligence is optimised for the current environment.

Step 1. Start Early

It can be tempting to begin due diligence work only when a prospect has been identified and developed through a separate process. After all, traditional due diligence can be a slow and painstaking process that takes up a lot of your team’s time and energy. Furthermore, it’s expensive. With limited research capacity, waiting until you have identified and developed prospects seems like a good strategy. However, starting late brings its own risks and means missing key opportunities.

Beginning due diligence research early can lend your team valuable insights into potential partners and the opportunities they may offer. The information you gather can serve as critical background information to help you develop and build relationships more smoothly. It can also help you narrow your field of focus and decide which potential prospects deserve your attention in the first place.​

Otherwise, waiting too long into your fundraising process to begin due diligence can pose its own risks, such as discovering a potential source of reputational damage well after resources have been utilised. It can be extremely frustrating when your team feels like they’ve wasted their time and efforts developing the prospect. Sometimes these “sunk costs” can even introduce an unwelcome and dangerous incentive to “look the other way” on the issue.

Despite these risks and opportunities, starting early with traditional human-led due diligence on a wide field of potential prospects poses significant challenges. This is where an automated platform proves essential. Automated research platforms are quick and can be used from the outset with little variable cost. An automated platform acts as a multiplier here. It greatly increases your due diligence team’s research ability and unlocks their ability to start early.

Key Takeaways:

  • Starting due diligence early in the fundraising cycle is preferable where possible.
  • An automated due diligence platform unlocks the valuable capability to start early.
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Step 2. Cast a wide net

Publicly available online data is a critical resource in due diligence, and not making full and efficient use of this information can undermine your fundraising process altogether. Unlike structured databases, this public data is unstructured, dynamic, and constantly evolving. It has a wide range of sources, from countless news media sites to corporate blogs and grey literature.

Manually finding, processing and sharing these vast data sources through teams of people is a time-consuming and error-prone process. Yet your due diligence needs to be capable of taking them all into account, whilst differentiating what sources are relevant to your particular subject.​

Given the quantity of information in question, this has become an insurmountable challenge for human-led due diligence teams. It has become impossible to sift through, evaluate, and prioritise this uncategorised data manually. While human-led teams used to be the only option for dealing with due diligence, this is no longer the case. 

Many databases provide tools for searching and categorising information, but it has traditionally been up to humans to try and sift through the unstructured data. This creates the risk of missed links between the two. This is where the value of a due diligence research platform like Xapien comes in. Xapien solves this problem and draws links between structured and unstructured data on its own, enabling human workers to focus their attention on higher value tasks.

Key Takeaways:

  • Due diligence research needs to draw on publicly available online data sources as well as databases to build a holistic and relevant profile of a subject.
  • Human-led teams are no longer realistically able to fully process, analyse, and link the large range of information available.

Step 3. Stay Alert

The aim of fundraising due diligence research has primarily been to identify reputational risks, but even this has evolved in the context of fundraising in the modern digital age. News now travels fast and remains in public consciousness, digitally immortalised for anyone to discover. The reputational impact of damaging revelations, especially for nonprofits, can be permanent. Even revelations about third-party associations can seriously damage your public image. 

One way to mitigate this risk is to move away from treating fundraising due diligence as a “one-off” process performed on individual prospects. Instead, the process should be regular and include many prospects. Of course, human teams may well not have the bandwidth for this constant and wider ranging research and analysis. 


AI and automation can help plug these gaps. An automated solution can help your team maintain a high standard of reputation safeguarding, even at the higher frequency and larger scope necessary today.

Key Takeaways:

  • In today’s precarious information environment, actively managing your reputational risk is more important than ever.
  • An intelligent platform can reliably and quickly assess and report on potential reputational risks, even by association.
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Step 4. Learn from your insights

Fundraising due diligence does not just have to be about checking your subjects/prospects for reputational and operational risk issues. A well-organised due diligence process can also generate a wealth of insights that can help your organisation thrive.

For example, there could be key points of information on your prospects that could be mutually beneficial if discovered and absorbed. These could include insights into the prospect’s previous projects or other interests, or you could uncover related relevant prospects that you can also pursue. A well-organised process allows you to remain open and receptive to the opportunities that your due diligence research can yield. Smart insights can help develop your networks, deepen your existing relationships, and map out future growth opportunities.

Key Takeaways:

  • Incorporate the wider insights you get from your due diligence research into your growth plans.
  • Remember that your fundraising due diligence can help your decision-making to both protect and grow your organisation and networks.

Step 5. Take immediate action

As soon as a round of due diligence is complete, your organisation should be able to immediately make decisions and take action based on the results. This is critical to both reputational risk management, and efficient and proactive broader decision-making. Making informed decisions quickly can be difficult if the information is disorganised or presented in an irregular way. Ideally, fundraising due diligence information should be delivered in clear, readable, comprehensive, and reproducible reports. 

Of course, human-compiled reports can meet this criteria, but the process requires extra work and time. With due diligence becoming a wider-ranging, ongoing process, these presentation requirements require yet more work and effort. Automated platforms can again provide an ideal solution. These platforms can immediately generate and deliver reports, standardised using a template that suits your organisation’s specific decision-making needs. 

Key Takeaways:

  • Action your due diligence insights as soon as possible. 
  • An automated due diligence research platform can produce reports quickly and efficiently, with even greater detail.

Using technology is the ultimate procedure

In the face of a transformed information and communication environment, the nature of efficient fundraising due diligence has also changed. ​

Starting research early in the due diligence process has become a necessity. Establishing a wide-ranging and ongoing process can best protect against risks, and generate a host of invaluable insights at the same time. These insights are valuable not just for fundraising but also for informing your organisation’s growth plan.

​All of these steps can be best tackled with an automated due diligence AI platform like Xapien. Our tool takes due diligence to the next level by:

  • Being simple to use, saving on training resources and enabling due diligence to be carried out immediately and consistently.
  • Scouring millions of publicly available data sources with just a few provided terms of context. 
  • Cross-referencing and disambiguating between structured as well as unstructured data sources with ease.
  • Delivering digestible, categorised reports that provide deep insights and can be shared amongst your team members as well as stakeholders.
  • If you want to see Xapien’s powerful mechanisms in action, get in touch for a free demo.
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