I am not trying to distort anything, I just don't agree with your "venture-capital has enabled Element to snatch away the little sustainable funding that exists" premise. I don't see what going after government contracts has to do with "open source funding" and I don't think that "using VC funds to give away free stuff for developers" is something to be held against them just because the XMPP companies are not willing to risk it.
If the XMPP business are thriving in the IoT space, good for them. But to me, as a consumer, this means nothing if they are not willing to compete in the space.
Also, as long as we are talking about Free Software for the end product, I honestly do not care about who is funding it. All I care about is that I can find some way for my parents to talk with me and see their grandkids without depending on Facebook/Google, and if doing it with Element/Matrix is easier than doing with XMPP/siskin, then I'll be using Element. I don't need any of them to pass some arbitrary purity test, I just need them to deliver something minimally usable.