You've heard the term "Nepo baby" — typically it means someone born into an unfair advantage of wealth or connections. But VC David Frankel just flipped that script, arguing on 20VC that he loves to fund a different kind of "Nepo baby": founders with a deeply ingrained, almost inherited, vertical expertise. This isn't about family money; it's about an unparalleled edge in a specific market that comes from a lifetime of exposure.
Frankel's thesis is sharp: these founders possess an intimate, unspoken knowledge of their industries that generalists simply can't acquire through research. It’s a gut-level understanding that spots non-obvious problems and builds truly category-defining solutions.
The Inherited Edge: When Obsession Beats Observation
Frankel argues that the most successful founders often come from backgrounds where they literally grew up inside the problem they're now solving. It’s less about privilege and more about profound, formative exposure. He points to TJ Parker, the co-founder of Pillpack, as a prime example.
“TJ Parker, right? Working in his dad's pharmacy when he was 15, 14, 16,” Frankel explained. “He has got more edge in that vertical than he knows.” Parker wasn't just observing the pharmacy business; he was living it. He understood the broken workflows, the patient frustrations, the inventory nightmares, and the payment complexities in a way no outside consultant ever could. This deep, almost cellular understanding allowed Pillpack to rethink medication delivery from the ground up, leading to its eventual acquisition by Amazon for nearly $1 billion.
This kind of expertise isn't something you pick up in a weekend sprint or a market research report. It's built through years of quiet observation, messy hands-on experience, and absorbing the unspoken rules and pain points of an industry. It gives these founders an internal compass, guiding them to solutions that feel obvious to them but revolutionary to outsiders.
From Kensho to Suno, HVAC to Rebar: Proven Vertical Acuity
Frankel extends this idea to other founders who built their "edge" through intense, focused work experiences. Consider Mikey Schulman of Suno, the AI music generation company that recently took the internet by storm. Schulman and his co-founders, Georg Kase and Martin Kamacho, didn't just stumble into AI music. They came out of Kensho, a firm specializing in AI for financial institutions, where they were deep in voice AI and audio processing.
Frankel recalls, “Mikey comes to to AI to voice AI to music to audio, right? They've come out of Kensho. That's all they did at Kensho. So you take Mikey and Georg and um Martin Kamacho, that's all they did. Martin was the CTO of Kensho.” Their years at Kensho weren't just a job; they were a hyper-focused masterclass in the very technologies that power Suno. This wasn't general AI knowledge; it was vertical AI expertise.
Another case in point is Evan at Rebar, a company focused on HVAC preparation and quoting. “He watched his uncle in this vertical was like there's nothing else he was going to do and I go like they have more edge than they know what to do with,” Frankel stated. Evan’s proximity to the nitty-gritty of HVAC work, seeing its inefficiencies firsthand from a young age, gave him an unfair advantage in identifying and solving problems that others simply wouldn't grasp. This isn't just knowing the market; it's feeling the market's pain.
What to Do With This
Stop chasing the next hot trend and start mapping your own deep vertical expertise. Pull out a pen and paper. List the industries, hobbies, or obscure niches you've been obsessively curious about since childhood, or where you've spent years in the trenches. Then, if you're building a team, prioritize co-founders who have this kind of "inherited" edge in your target market. Ask them not just what they know, but what they lived for years that makes them uniquely qualified to solve this problem. If your current product idea doesn't align with someone's profound, almost innate vertical understanding, rethink the idea or find the right co-founder who has it. That deep, messy experience is your secret weapon.