If you just look at the success stories, you could say that today's VC model works great too - see OpenAI's work with LLMs based on tech that was comparatively stagnating inside of Google's labs. Especially if nobody remembers Theranos in 50 years. Or you could say that big government-led projects are "obviously" the way to go (moon landing, internet).
On paper, after all, both the "labs" and the VC game are about trying to fund lots of ideas so that the hits pay for the (far greater) number of failures. But they both, after producing some hits, have run into copycat management optimization culture that brings rapid counter-productive risk-aversion. (The university has also done this with publish-or-perish.)
Victims of their own success.
So either: find a new frontier funding source that hasn't seen that cycle yet (it would be ironic if some crypto tycoon started funding a bunch of pure research and that whole bubble led to fundamental breakthroughs after all, hah) or figure out how to break the human desire for control and guaranteed returns.