What is Earmarking?

Earmarking is the practice of setting aside funds for a specific purpose, project, or recipient. In government finance, it refers to dedicating tax revenues to a particular expenditure. In corporate accounting, it means designating cash for a specific future use.

For Startups: A startup might earmark a portion of its recent funding round specifically for a new marketing campaign or for hiring key engineering talent. While this is more of a budgeting and internal planning tool, it helps ensure that capital is deployed according to the strategic goals presented to investors.

Example: After raising a seed round, a startup's board approves a budget that earmarks ₹50 Lakhs specifically for product development and ₹25 Lakhs for initial customer acquisition efforts over the next six months.