I’m not so sure about that. Any system that operates like this will have the same problem:

1) Scientists must look for funding

2) Scientists with the best reputation are more likely to be funded

3) Scientists are incentivized to prioritize reputation above scientific rigor

This would plague private funding just as much, assuming we’re talking about grant style funding where the scientist has a large amount of freedom.

Within private sector R&D, you don’t have this problem. But you also don’t get the flexibility to pursue questions that have no clear monetization path.