It depends on what you mean by “returns on taxpayer money”. This seed investment is creating jobs, funding technology that creates even more jobs, that contribute to the local economy thus increasing tax receipts.

Private Capital can’t reap such benefits, which also tend to be longer term investments, and thus is not interested.

Ah, yea they teach that even in uni courses in econ: The public extarnalities offer a great return on investment in private businesses.

Of course it is wonderful in theory. In practice, my own opinion is that it's a really bad idea.