The short answer is that the times have changed from back when government-funded applied research was a primary source of startup innovations. The reality is that small companies move faster and are more able to adjust to surprises in an agile manner than the Government. Now the tables have turned and the Government needs mechanisms to find new things because it's certainly not inventing them all in-house.
Speaking as one of the other members of the population, I have a few mixed feelings about the government using public funds for equity buys. Conversely, if that mechanism allows the USG to more rapidly gain access to novel inventions than they have and those inventions optimize the Government's performance, it's a drop in the bucket and probably saving the taxpayers a bundle.
If you find Google Earth useful, thank In-Q-Tel. When the startup that produced that technology was financed, only realtors in California had ever heard of it.
(Yes, I'm a little biased. I have been a part of some public-private partnerships that have performed well.)