1) Government identifies some area that needs focus, usually so they can say they're doing something.
2) A fund is created with whatever the government thinks is enough to sound like they're doing something.
3) Request for proposals on how to spend the money within said area is sent out.
4) Interested parties figure out how to get their hands on the money in the fund.
Examples of who will apply:
a) Existing companies who try to spin something they already have into something that can give them free money for whatever they were already doing.
b) Scammers who have no intention of doing anything of value and simply try to do the minimum to say they tried (like some Kickstarter scams).
In best cases the winners are picked based on superficial evaluation of who lives up the criteria and who can bullshit most on paperwork. In worst case winners are picked based on who can provide the best kickbacks, ranging from just professional relations or dinners to actual kickbacks.