the Lemmy devs are funded by NLNet donations and user donations, no business LW, lemm.ee, lemmy.zip, all of the top 20 or 50 instances are funded via donations

You are looking at this super-tiny space of "the Threadiverse" and taking it as the whole "social media landscape". This is textbook example of selection bias.

How much do you want to bet that we will see a Reddit-like alternative built on ATProto by the end of the year? Which one do you think will have a better chance of success: the application that is starting of a potential userbase 1M MAU or the one with 25M+? How was Bluesky funded? Was it via donations?

Network effect can’t be fought by money

No, but money can buy infrastructure and development which is sorely needed. We are not limited because people don't want to leave the walled gardens. They are eager to leave, but we keep failing to offer them an usable alternative.

The reason that Fediverse doesn't grow is not because of any single particular feature of the other alternatives. It's quite easy to say "Bluesky won over Mastodon because it has better content discovery" or "Matrix is not a good alternative to Discord because it is slow and has a moderation problem", but all of these tiny things are not fundamental issues. They can all be fixed, but they just don't get fixed fast enough because these organizations are lacking in resources compared to the VC funded alternatives.

Funding is like oxygen. Organisms that do not have circulatory systems can only grow to the size of insects. If we keep constraining ourselves to only these very limited sources of funding, we will be forever bound to this tiny insignificant niche space.