Final answer:
Airbnb utilized private investor funding early on due to the high risks involved, later opting for an IPO to raise more capital and provide liquidity. Expertise from venture capitalists was crucial for its growth. Similarities and differences exist between bonds and bank loans in corporate finance.
Step-by-step explanation:
Analyzing Airbnb's journey from its inception to its IPO reveals key aspects of early-stage corporate finance. Very small companies tend to raise money from private investors instead of through an IPO due to high risks that make their stock less appealing to the public. These startups prefer private funding for more flexibility and to avoid regulatory scrutiny. As companies grow, an IPO allows them to raise significant capital, often more than what they could obtain through bank loans or bonds, and provides a way to reward early investors and employees with liquidity.
Venture capitalists generally have better information about the prospects of a young firm compared to potential bondholders because of their close involvement and expertise in guiding startups. A bond and a bank loan both represent debt obligations for a firm, but bonds can be traded on the market and typically involve less restrictive covenants than bank loans.
Regarding equity calculation, for someone like Fred who just bought a house for $200,000 with a 10% down payment, his equity in the home would be the down payment amount at the time of purchase, which is $20,000.