(JESSICA RINALDI FOR THE BOSTON GLOBE)
(JESSICA RINALDI FOR THE BOSTON GLOBE)

For the past few days, Cambridge’s General Catalyst and Charlie Baker, the potential Republican nominee for governor, have been embroiled in a bit of a controversy.

On Friday, Baker was the focus of  an investigation by PandoDaily‘s David Sirota (that is still ongoing) into what could be a violation of “pay to play” rules that center around a $10,000 contribution Baker made to the New Jersey Republican State Committee. The problem: Baker’s employer at the time of the donation was General Catalyst Partners, the local venture capital firm that also happens to have been awarded a $25 million state pension contract by New Jersey governor Chris Christie, of whom Baker has been an avid supporter.

As Scooby Doo might say, “Ruh roh…”

Needless to say, Baker and General Catalyst deny any wrongdoing. Baker told the Globe on Friday: “I am not an employee…I have no idea who Catalyst solicits funds from.’’

“My job was to find interesting companies to invest in and that is what I was focused on,” he added.

General Catalyst, based in Harvard Square, has invested in companies like Airbnb, Snapchat, HubSpot, Warby Parker, and Kayak, among others.

Bill Fitzgerald, General Catalyst’s chief operating officer, told the Globe, “We verified Charlie’s positions and found that his role did not require any filings concerning the contribution.’’

“What is clear is that Charlie had no role in working with the state of New Jersey on the pension funds. It is wrong to think in that context,” he said.

Sirota is still not buying it, and he went on MSNBC last night to discuss the matter.

General Catalyst TeamThe skeleton key of the entire affair may be the “context” that Fitzgerald is referring too. The grey area that allows both sides to claim the “truth” of the matter.

How can Baker deny that he is an employee of General Catalyst while Sirota affirms that he is a partner and executive?

(And with Baker being  still listed on General Catalyst’s “team” webpage under the group “XIR/Partners” at that?)

Baker’s role at General Catalyst allows for all the ambiguity. He is an XIR, what may be called an  executive-in-residence, at the firm. He is also listed as a partner, but, according to sources, General Catalyst has an unusual role naming structure. They call “partners” what most other firms consider to be “consultants,” and use the title of “managing director” for what most VCs refer to as “partners.”

As the firm’s website said, “As an XIR/Partner at General Catalyst Partners, Charlie Baker focuses on investing in mid-size firms, primarily in the health care services industries.” So no matter what Baker and GC may argue, Baker’s involvement in the company’s investments is pretty clearly stated, and Baker’s bio even notes he is on the board of directors for three portfolio companies, Oscar Healthcare, Oceans Healthcare, and TearScience.

That doesn’t mean that Baker is not culpable in the entire matter because of General Catalyst’s title structure. It seems everyone on the Baker/GC side thinks that there was no “pay to play” rule breaking because of Baker’s role as an XIR, a title General Catalyst pretty much invented.

As General Catalyst managing director David Fialkow told BetaBoston’s Kyle Alspach in April, “the “X” in XIR stands for the hard-to-describe “x-factor” that makes experienced executives highly valuable to aspiring entrepreneurs.”

No really, that’s the job description. And, Baker probably got paid for that “job.”

General Catalyst’s XIR is actually a new spin on the entrepreneur-in-residence (EIR) role that has been going on at VC firms for awhile now. What is an EIR? Depending on who you talk to, an entrepreneur-in-residence is either a key figure in helping a company grow from startup to full-fledged business or, in many cases, a complete BS job.

Over the years, when I’ve asked folks who are EIRs at local venture capital firms, even some of those EIRs don’t know what their actual job is.

That’s right, here is an actual conversation I’ve had before:

Me: So you are an EIR at ——? What exactly do you do, what is an EIR?

Anonymous EIR: To be honest, I’m not even really sure what I’m supposed to do or what an EIR is.

When it comes down to it, the role of XIR/EIR serves two purposes. For venture capital firms, it’s an opportunity to align with a “winner” or insider who has name recognition as someone who has already led (or played a key role at) a successful company or project. Basically, “Hey look, we have Founder X working as an EIR. Our values are the same as you, Potential Future Portfolio Company. We are hip and have Founder X working with us to prove it.”

For the EIRs, it is a source of income while they are “in between” projects and a way to get “inside” the VC world so that raising funding for a new venture is a little less challenging. In Baker’s case at General Catalyst, it was employment for the empty space in between running for governor.

So what did Baker get paid, if he even did? According to a source with knowledge of the EIR world, he likely made a mid-six-figure salary. Which, as my source told me, “Is much higher than a typical EIR.” If Baker wasn’t paid, it was a mutually beneficial public relations thing, I was told.

By comparison, I was told that EIRs probably make between $10,000 to $15,000 per month, basically to give VCs the right to be the first investors if they start a new company or to place them at the head of a portfolio company with inexperienced leadership.

The vagueness of the EIR role is perfect for politicians “in-between” gigs. Which is why Baker probably ended up as an XIR at General Catalyst. It allowed him to make some money, makes him more appealing to the tech community that is gaining influence in Massachusetts politics, and still lets him turn around when a controversy arises and say “I don’t WORK there.”

Which is why Sirota is not backing down from his assertion that Baker was involved in some rule breaking in the case of General Catalyst and the New Jersey Republicans.

The ambiguity of Baker’s XIR role at GC allows him to say that he did nothing wrong.

Although Sirota takes some liberty in calling Baker an “executive” at General Catalyst, the issue is that Baker gave money to the ruling party in a state that later turned around and awarded the venture firm he works for the pension contracts for the state. General Catalyst makes a percentage of the returns from the pension money invested, earnings used to pay Baker’s salary. Baker’s salary becomes part of the personal wealth he uses to back organizations like the New Jersey Republican State Committee.

For Sirota, this is a the type of situation that New Jersey’s strict “pay to play” rules are intended to prevent.

Read more: Charlie Baker brouhaha ignores the reality about General Catalyst

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