In search of project substance: how do private investors evaluate projects?

Purpose – The paper reports on a study of private investors' assessment of projects. The study includes both financial and non‐financial analysis of projects, with an emphasis on non‐financial analysis. The purpose of this paper is to explore factors that influence the substance (investment quality) of projects, and how that substance should be evaluated. Design/methodology/approach – Results in this paper are based on literature studies as well as interviews. A state‐of‐the‐art analysis has been carried out related to private ownership, venture capital investments, corporate finance and project management. Ten prominent Norwegian decision‐makers are interviewed. Findings – Results are present in two perspectives. The first perspective represents factors that contribute to the substance of a project. The second perspective illustrates how the substance of a project is analysed. Results from this study indicate that the substance of a project is not only dependent on the characteristics of the deliverables, but is also context dependable. The involved decision‐makers evaluate to what extent potential projects are compatible with company strategy, if they have trust in the people who will manage the investment, expected market development and exit options. Practical implications – Different investors have their individual modes of operation. The results indicate that the formalised analyses that are presented in many textbooks are done, but at a late stage in the project selection process, partly serving as quality assurance. Initially, analyses are done on an aggregated level. In addition, the paper discusses to what extent the findings are applicable in a public sector context. Originality/value – This paper studies how project selection is done by people investing their own money. Most previous research has focused on project selection from a managerial perspective, not from an owner's point of view.