Why would that shock you? Of course the government is going to invest in technology it could find useful. In the really hardcore stuff it's simply called a "research grant," and it powers every single American research university.
Conflict of interest. At least a research grant has outcomes that are supposed to be public and benefit the public.
A VC arm that's part of the government seems like a monstrous hybrid of private and public. What is the profit for? For the same reason that it gives one pause regarding what the CIA is doing investing in social media. If it's totally OK, why not have the government invest in private prison companies?
And don't for get that for decades most of the Rnd into AI and ML was funded by the government - back in the 80's I had a co worker who moved away from AI for that reason.
Let alone how SV was in large part funded and formed by Military Contracts
