One of the countless children spawned by the mingling of transient adventurers in Waterdeep, Caedmon was born as “Marcenix Morelen.” His mother was a moon elf bard, and his father a moon elf bladesinger of some minor royal lineage that could be traced all the way back to the first eladrin settlers of Abeir-Toril.
His father, Krethil, resumed his adventuring a year after his son's birth and was promptly slain by a blue dragon in its lair. His mother, T'lindaone, chose a more urban life, supporting herself and her only child by working as a tavern wench and singer at one of the more respectable Waterdhavian inns.
During the twilight years of Ahghairon's reign over Waterdeep, a number of long-thinking guildmasters had started preparing for his departure (one way or another) and started making quiet moves accordingly. One such move consisted of a thieves' guild taking control over as many inns as possible, recognizing their strategic value as hubs of information and assets. Occasionally these takeovers were handled with a heavy hand, and in the case of the inn T'lindaone had made her workplace and home, thugs came around one night to forcefully claim the loyalty of the owner and staff. The retired bard adventurer made her stand, but eventually fell and succumbed to battle wounds, leaving her very young son hiding in a back room. He managed to stay hidden from the attentions of the new owners for years, with the help of the other staff, living in the crawlspaces and attic of the tavern while it slowly converted into a den of thieves.
Eventually, the orphaned boy was discovered by some of the more observant patrons after he attempted to make off with some of their coin.