Then what does? Most of the innovation we have witnessed and enjoy in our society for the past 20-30 years has not been driven by governmental money or agencies but by private money.
Why don't we have a "government YC" (yeah, I don't mean DARPA-like, or the other mechanisms for finding funding from the government, which requires way too much navigation f bureaucratic paper-work and hoop-jumping) - an office of the government that can allow any individual to apply for seed funding for ANY idea in ANY industry that they can see through - make the process nimble and quick. Ensure that there is infrastructure/systems to allow for accurate tracking and reporting on the spend of monies given - think an EDD card that the startup entity gets and all expenses are tracked via the transactions on the card. Integrate it with banks and other private and public sector services with credits, like compute credits from amzn/goog etc... tax services, payroll etc...
And when you apply - it effectively sets-up an individual LLC in your name as the defacto entity to track your startups progress with giving you an EIN etc...
Heck, this should be a simple thing to architect if everyone in the business/startup world were truly supportive of, and willing to actually be, the "innovation" unicorn they all claim to be.
Examples? The internet, web & search, gene sequencing & engineering, deep learning, self-driving vehicles, VR, 3-d printing, modern batteries, wifi, etc. all followed the same path where massive government research funding and with e.g. the humane genome project or DARPA grand challenge even more direct support.
It's true that private investment was also important but that generally only enters the picture when something is developed enough to the point that investors can see an eventual payoff. As a simple example, Google, Yahoo, and Lycos were all direct results from people like Larry Page getting NSF research grants:
