As someone who is running a business whose main occupation is to help the government give money to tech companies and startups, I actually disagree with this.

I think most startups don't need money (and they typically don't get any, because most government funding is match funding, and so you have to spend to get, and very early startups don't spend anything). Or rather, they need money, but probably not from investors, and certainly not from the government. They need money from customers.

My thoughts on why money is toxic to most entrepreneurs are pretty well summarised in this article: http://swombat.com/2011/12/8/investment-cushion-springboard

Growing companies that have figured out how to make their own money already do need money, but the reason they can make good use of it is also the reason why they don't need it as much as the cash-starved early startups.

To a functioning company, money is lifeblood, and more money can help make the company a bigger success than it already is (or make it more competitive against other companies in the same space).

To an early startup, money is a toxic sludge that will slow it down, cause weird and unpredictable mutations, and possibly kill it when it might have lived.

Disclaimer: I'm talking about startups operating outside of the Magical Land of Silicon Bubbles, who have to actually create a viable business rather than just build something popular that makes no money and then sell it for a billion dollars.