In this episode of Max Value, host Ben Towne sits down with Jeff Gray, the once and future CEO of SC Labs, a cannabis testing laboratory founded in Santa Cruz, California in 2010. Jeff traces the arc of building SC Labs from a dinner conversation between four like-minded partners into one of the most recognized labs in the cannabis space — expanding from California into Oregon and eventually eyeing a national hemp footprint. He discusses the regulatory burden of operating in a Schedule 1 industry, the challenge of raising capital as a legacy cannabis CEO of color, and the disciplined decision to retain 90% of the cap table before finding the right private equity partner. After a successful exit in 2022, Jeff reflects on the honeymoon phase of the deal, the complexity of integrating a multi-state roll-up, and the hard realities of synergy expectations in a collapsing market — setting the stage for his return to the helm.
Chapter 1: Welcome to Max Value
Host Ben Towne introduces the show and guest Jeff Gray, the once and future CEO of SC Labs. Rather than a standard Q&A, Ben frames the conversation as a narrative journey — covering the founding of the company, scaling, the exit, and what happened since. The episode sets up as a story-driven deep dive into building and selling a cannabis business.
Chapter 2: Founding SC Labs
Jeff recounts growing up in Santa Cruz, California — a progressive, cannabis-friendly community — and spending 30 years in the cannabis industry. SC Laboratories was born in 2010 from a dinner conversation between four partners with complementary skill sets, united by the vision of stewarding cannabis from an illicit drug to something akin to a botanical supplement. The lab’s core mission was empowering patients through data: testing for pesticides, consumer safety, and active cannabinoids like THC and CBD. Jeff also traces the industry’s evolution through the 2018 Farm Bill, which effectively legalized type three cannabis as hemp and introduced a new commercial frontier.
Chapter 3: Expanding Beyond California
Jeff explains that cannabis markets are confined within state lines, making state-by-state expansion the only path to growth. The company moved into Oregon around late 2017, but the first real opportunity for a national footprint came with hemp — which, like alcohol, is federally legal with state-level regulatory variation. Around 2020, at the height of the hemp/CBD boom, SC Labs saw a clear opening to serve companies with national distribution. Ben interjects to highlight what originally attracted him to the company: a scientific, safety-first approach to a legally gray industry.
Chapter 4: Facing Challenges and Bias
Jeff reflects on the compounded challenges of being a legacy cannabis operator: the stigmatization of the industry, an almost Faustian regulatory burden, lack of access to banking and capital under Schedule 1, and the inability to claim cost of goods sold under 280E. As a CEO of color without a traditional business pedigree, he also rarely saw people who looked like him at the investment table. Despite this, SC Labs pursued audited financials and ISO accreditation years ahead of competitors — and by the time they were ready to exit, they had protected the cap table by retaining nearly 90% ownership, passing on almost every investment offer until the right partner appeared.
Chapter 5: Finding the Right Partner
Jeff and Ben discuss the deal process with their private equity partner — a roll-up play that combined labs in Colorado, California, Oregon, Michigan, and Arizona. Jeff emphasizes the importance of treating the deal as a conversation between equals, being clear on non-negotiables, and the value of a trusted circle of advisers built over 10 to 12 years. A personal milestone — the arrival of twins mid-negotiation — tested the partner’s character: they gave Jeff two months of complete radio silence, which he credits as one of the most meaningful signals of trust. Post-close, the excitement of generational wealth was quickly met with the hard realities of integration, synergy expectations, and a collapsing cannabis market.
Chapter 6: Next Episode
The episode closes with a preview of the conversation to come — specifically, the fortunes of the cannabis industry changing on a dime, the impact of shifting regulations, and what Jeff did differently when he got a second shot at leading SC Labs. Ben teases the question of high and low points among the founding partners, and whether all four were always aligned — setting up the next installment of Jeff’s story.
