[foodawg]

I have to agree with this point. No, you do not have to be part of an industry to do work in it. It will certainly make the proposition very difficult however.

One of my YC ideas was a product aimed at the HR industry. I personally have no affiliations with it but my co founder was a part of it. While my ideas were very interesting from a freshness perspective, I was often was off from what our client base wanted the most.

The benefits of being part of the industry is having connections, knowing where to look, and what to look for. If you are not part of it, this can be time consuming and costly. It's extremely beneficial to have a co founder, or just an adviser with industry experience. Like Michael's comment, their leads give you many heads to run ideas by, and the resources necessary to understand your clients.

[michael_dorfman]

The ideal situation in many ways is to partner with somebody from the industry. As you say, this can be a great source of domain knowledge, and contacts. A domain expert with business skills makes a great co-founder; alternately, a trio of techie, domain expert, and business manager.