I might sound a bit naive, but what is the vetting process for distributing funds? This sounds more like a grant than traditional VC funds.

Raising capital from a good VC firm is hard. period. If you do not have track record, you have to go through a lot of due diligence, it is selective. I can also understand why, because it is some LP's money so you want to invest in a startup that is risk-aversed.