Agree. There is a decision-point with tradeoffs. Many successful ventures were neither open-source nor VC-funded, but in the middle somewhere. As what should be open-sourced might be a small but crucial aspect of what was learned and implemented- not all the Crown Jewels have to be given away.
Discussion
I think you might have to reveal the relevant sources to the people evaluating your grant, tho. They should be able to contact anyone applying for a grant to get more information. And a person should be named on your results as your evaluator to discuss the results with.
That's one reason why I think the evaluators should be paid, if the process is transparent. It raises confidence in their professionalism and fairness, aligns their incentives with those of the applicants, and compensates them for doing all of this work in public.
They become mentors, rather than mere judges.
that point about developing the developer ecosystem is a key point
you do not simply master a protocol in 3 months... takes at least 6 months to get really comfortable and competent with a whole new API and protocol