If your startup fails then you software is harder to value. If the bank have ovens at least they can resell them. If you have a piece of software it's much harder to value or sell.
Interesting, in that sense software is like making an art piece where value is uncertain. That definitely opens a viable case for public funded software. Plenty of movies are produced with the help of Govt for example.
Government often supports investors making movies; likewise, governments could try to get on board with good venture capitalists in funding software, and this does happen in some places. Government panels or individuals selecting which software to fund runs into the principal agent problem, due to lack of skin in the game.
