Which statement describes bootstrapping versus external funding and lists common sources of startup capital?

• A. Bootstrapping uses internal resources; external funding uses investors or loans such as angel, VC, grants, banks, crowdfunding.
• B. Bootstrapping relies on external investors; sources include angel, VC, grants.
• C. Bootstrapping is illegal; external funding is mandatory.
• D. Bootstrapping is the same as crowdfunding.

Answer: (A)

Bootstrapping means funding the business from its own cash flow and personal resources, avoiding outside money. External funding brings in money from outside the founders, either as equity from investors or as borrowed funds from lenders. The best description matches this by saying bootstrapping uses internal resources, while external funding uses investors or loans such as angel investors, venture capitalists, grants, banks, and crowdfunding. This captures both the source types and the common ways startups raise capital.

Why the other ideas don’t fit: bootstrapping is not about relying on external investors, and it’s not illegal or mandatory to pursue external funding. Crowdfunding is indeed a form of external funding, not a form of bootstrapping, so equating bootstrapping with crowdfunding is inaccurate.