There is a significant public benefit. The very existence of silicon valley is a testament to the effects pouring in government funding can have. That's of course not to say that it always works.

But such funding is also quite low risk for governments: even when the funded companies fail it serves to build talent pools, and a substantial proportion of every dollar comes back to the government in taxes because they get spent on things like salaries, and the remainder gets spent on products and services where a further proportion ends up paid in tax.

And when they succeed, the economic activity has a massive ongoing value both in taxes, reductions in benefits payments due to increased overall employment and indirect economic boosts (the successful companies increase other economic activity by buying products and services).

It's not either/or - there are many types of projects that are not suitable for VC funding for various reasons that can still have long term beneficial effects to society.