Cannabis Companies in California Have Lost Millions Due To Poor Regulations. California’s New Bill Could Change That.

Keerthi Vedantam

Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.

Cannabis Companies in California Have Lost Millions Due To Poor Regulations. California’s New Bill Could Change That.
A $1.9 Billion Canadian IPO Could Make LA the 'Center of the Cannabis Universe'

When PSI Labs started testing cannabis for THC levels and pesticides in 2015, it entered into an unregulated industry that would soon grapple with the effects of legalization and—perhaps more troubling—was prone to sloppy testing practices that gave varying results on potency and toxicity levels.

“A client comes to you. They don't like the numbers that they see,” said Ben Rosman, co-founder of the Michigan-based PSI Labs, which expanded into California earlier this year. “And they're like, ‘I can find another lab who's going to give me the numbers I like,' or 'I don't like that you failed me. And I know there's another lab that's going to give me a pass.'

What Rosman is referring to is the potency rating on marijuana. The higher the rating, the more powerful the drug.


“A lot of folks sort of test as marketing, not just quality control, and they want to see the highest potency possible,” Rosman added. “Or they just test purely to drive their product to market alone.

But times are finally changing. Five years after California legalized marijuana in 2018, both the state and industry players are wrestling with standardization and varying regulations that have cost cannabis producers tens of thousands of dollars while endangering consumers and the environment.

A law signed by California Governor Gavin Newsom has ordered the state to develop clear and specific guidelines to test cannabis products.

The bill will require California’s Department of Cannabis Control to create a strict set of standards for testing cannabis products, including pesticides, contaminants, cannabis potency and heavy metals. The standards will be established by 2023 and all cannabis labs in California will have to follow them.

“Testing standards provide consumers with confidence about cannabis product safety and accuracy of cannabinoid content,” the DCC said in an email. “These standards are what distinguish legal, regulated cannabis from illicit cannabis. Cannabis sold through unlicensed sources is not tested, may contain unsafe contaminants or undisclosed ingredients, and is often labeled with higher cannabinoid content than the product actually contains.”

What labs test for, and how they test samples, is often at the discretion of the lab itself. The cannabis buds at the top of the plant are often more potent than the bottom-most buds, and some portions of the plant may contain more microbiological contamination than others. Labs claim to strive to collect a representative sample of the entire batch of cannabis (though how they determine what a representative sample is is also up for grabs).

The process has led to “lab shopping”, by which cannabis processors and growers go to labs that will produce more favorable results, even if they’re less accurate.

Kurvana, a cannabis vape pen company founded in 2014, has lost millions of dollars over the years due to poor regulation. Varied results in sample collection has led to contaminating entire cannabis production facilities. Kurvana employees had to travel to pot farms and observe how it was grown and cultivated to make sure it was up to standard. In 2019, a lab they tested with got shut down for poor practices, endangering the company’s reputation, forcing it to recall their products tested in that facility, and burning around $150,000 in testing fees.

“It got a lot more complex, too, because the different testing labs were using different instruments and different sample prep methods and testing methodologies,” Moghaddam said. “So one testing lab made tests for pesticide and says it'd pass and another testing lab made tests for pesticides in it, [and it might fail]...And that was a big challenge at the time.”

But some wonder if further regulating the legal cannabis market may end up inadvertently bolstering the illicit cannabis market.

“The more expensive you make the product for the end use, so the more you tax it and regulate it, the more expensive it is for the user,” said David Wolf, co-founder of the cannabis testing lab maker Greenbox Builders. “And then that's why a black market can crop up. The black market in California is bigger than the legal cannabis market.”

Despite having some of the most lax cannabis laws in the country, California still has a robust underground cannabis market where growers and sellers are not confined to the increasingly strict rules legal cannabis sellers are. The market is nearly double that of the legal pot market in the state and, between having a cheaper product and lax cannabis penalties, it’s nearly ubiquitous.

Large homes for illegal pot cultivation are tucked away in the Mojave Desert and Antelope Valley, where water (already sparse in those areas) is stolen from local residents and toxic pesticides (a few drops could kill a large bear) are sprayed all over the plants, endangering people and wildlife.

In 2020, the California Department of Public Health tested illicit cannabis vape cartridges seized by the state and found additives and harmful dilutants that lead to E-Cigarette and Vaping Associated Lung Injury (EVALI). Almost all cases of EVALI, according to the DCC, come from unlicensed products.

But Rosman is hopeful standards will fully legitimize his industry.

“One of the things that was most exciting about...expanding into California is generally having a bigger platform and having a louder voice in speaking about the importance of data integrity and raising the bar and talking about the importance of standardization of lab tests, cannabis lab testing practices,” he said.

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⚖️FTC’s "Click to Cancel" Rule and Its Ripple Effect on Tech

🔦 Spotlight

Happy Friday Los Angeles,

The FTC’s new “Click to Cancel” rule is shaking up subscription-based tech. Now, instead of navigating a maze of cancellation hurdles, users can cancel subscriptions as easily as they signed up—with a single click. This shift is a wake-up call for SaaS, streaming, and app-based companies, where once-hidden exit options often kept users around simply because canceling was a hassle.

The rule also requires businesses to send regular renewal reminders, ensuring customers stay informed about upcoming charges. It's more than a cancellation button—it’s about transparency and giving users control over their decisions.

For startups, the impact goes deeper than UX adjustments. Many have relied on "dark patterns," which subtly discourage cancellations by hiding the exit. Now, companies must shift toward building genuine loyalty by delivering real value, not by complicating exits.

While this might affect retention rates initially, it could lead to more sustainable business models that rely on satisfaction-driven loyalty. Investors may start prioritizing companies that emphasize transparent, long-term engagement over those that depend on dark patterns to maintain retention metrics.

The rule opens the door to more ethical UX design and a truly user-centered approach across the tech industry. It may even set a precedent against manipulative design in other areas, such as privacy settings or payment methods.

Ultimately, the “Click to Cancel” rule presents an opportunity for the tech industry to foster trust and build stronger customer relationships. Startups and established companies that embrace transparency will likely stand out as leaders in a new era of customer-centric tech, where trust—not tricky design—is what retains users.

As the tech landscape continues to evolve, LA Tech Week 2024 offers a chance to explore these shifts in real-time. Check out the upcoming event lineups to stay informed and make the most of your time:

For updates or more event information, visit the official Tech Week calendar.


🤝 Venture Deals

LA Companies

  • Ghost, a company supporting top brands and retailers with streamlined logistics and fulfillment solutions, raised a $40M Series C funding round led by L Catterton to fuel its continued growth and innovation. - learn more

LA Venture Funds
  • Assembly Ventures participated in a $27M Series A round for Monogoto, a provider of software-defined connectivity solutions that enable secure, cloud-based IoT and cellular network management on a global scale. - learn more
  • Angeleno Group participated in a $32M Series C round for REsurety, a company that recently launched an innovative clean energy marketplace aimed at providing better financial and operational insights to support renewable energy transactions. - learn more

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    🌴🧑‍💻 Your Guide to LA Tech Week 2024

    🔦 Spotlight

    Happy Friday Los Angeles,

    As many of you know, LA Tech Week is right around the corner, kicking off next Monday October 14th bringing together founders, creatives, investors, and engineers for a week of immersive events, panels, and socials across the city. From blockchain and AI to biotech and design, LA Tech Week is a chance to dive into the ideas shaping today’s technology landscape.


    What to Look Forward To

    Insights from Visionary Leaders: Hear firsthand from industry trailblazers as they share stories, challenges, and key lessons from their experiences. Expect fresh perspectives on AI, venture capital, biotech, and the ethical questions around emerging technologies.

    Interactive Panels: This week isn’t about watching from the sidelines; it’s about engaging directly with the tech community. Participate in hands-on panels discussing everything from startup scaling to ethical AI, with honest insights from those actively shaping these fields.

    Networking Mixers & Social Events: Meet and connect with founders, VCs, developers, designers, and fellow techies across LA. Rooftop mixers, lunch meetups, and creative gatherings offer the perfect chance to spark ideas and collaborate.

    Plan your week with the daily lineup, organized by location for easy navigation:

    For updates or more event information, visit the official Tech Week calendar.

    Enjoy LA Tech Week 2024!!


    🤝 Venture Deals

    LA Companies

    • Clout Kitchen, a Los Angeles and Manila based startup, has raised $4.45M in seed funding, co-led by a16z SPEEDRUN and Peak XV’s Surge, to develop AI-powered digital twins, which enables gaming creators to produce realistic virtual avatars for content and fan engagement. - learn more
    • MeWe, a privacy-focused social media platform, has raised an initial $6M in Series B funding led by McCourt Global to support Web3 integration and expand its decentralized network for 20 millions users. - learn more

      LA Venture Funds
      • EGB Capital participated in a $10M Series A funding round for MiLaboratories, which develops software that enables biologists to independently analyze complex genomic data, accelerating research and discovery in fields like drug development. - learn more
      • Crosscut Ventures participated in the $13.75M seed round for Airloom Energy, a company focused on developing airborne wind energy technology to harness high-altitude winds, with plans to accelerate a pilot project in Wyoming. - learn more
      • Overture VC participated in a $5.5M Seed funding round for Molg Inc., a company developing robotics and software for circular manufacturing, designed to disassemble electronics efficiently and recover valuable materials to reduce e-waste and support sustainable production. - learn more


        LA Exits

        • Options MD, a Los Angeles based telemedicine platform that provides care for people suffering from severe and treatment-resistant mental illness, is set to be acquired by Resilience Lab, an AI-driven provider focused on enhancing mental health care access. - learn more

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        LA Tech Week 2024: Saturday-Sunday Event Lineup
        tech-week

        Here’s what’s happening during the closing weekend (Oct 19 - Oct 20) of LA Tech Week 2024! Events are organized by location so you can easily catch the sessions that interest you most.

        SATURDAY EVENTS

        BEVERLY HILLS

        12:00 PM

        • BIG Showcase (Invite Only):

        BIG Showcase (Invite Only)

        2:00 PM

        Light Dao

        Struck Capital, Seahorse Express

        EAGLE ROCK

        12:00 PM

        Sunrise Integration, Shopify

        EL SEGUNDO

        9:00 PM

        Administratum, Valar Atomics

        HOLLYWOOD

        10:00 AM

        Passes

        MALIBU

        6:00 PM

        • Malibu Beachfront Investors Networking & Wine Tasting:See Details

        Gaya Ventures

        MARINA DEL RAY

        6:00 PM

        • Awaken Your Spirit: A Journey of Transformation (Invite Only)

        Sagos Distro, Alma Wellness

        SANTA MONICA

        7:00 AM

        Founders Running Club

        8:30 AM

        Techstars

        9:00 AM

        Magic Mind

        StartupStarter, Inc., City of Santa Monica

        10:00 AM

        Gen She

        AI LA

        Crea, Barry's, Unsubscribe

        10:30 AM

        Plantologist

        11:30 AM

        • Pickleball Palooza (Invite Only)

        YouTube

        1:00 PM

        • Realfren Games: From strangers to an inner Realfren within 52 weekends: See Details

        Office for Humanity and Circuit Works

        • Talking blockchain technology with special guests: See Details

        LadyDayDao

        5:00 PM

        KARD, What's Plots

        THE VALLEY

        7:00 AM

        Camino5

        VENICE

        9:00 AM

        Westside Yogis

        11:00 AM

        Open App

        1:00 PM

        Ripe and Teddy's Hot House

        4:00 PM

        • Fashion Forward: How AI is Redefining the Fashion Industry: See Details

        VIAVIA, BNTO.RENT, ALMA.AI

        VIRTUAL

        11:00 AM

        BLCK UNICRN

        WEST HOLLYWOOD

        7:00 PM

        Next Sequence

        SUNDAY EVENTS

        INGLEWOOD

        12:00 PM

        Entrepreneur Ventures, VCPE GROUPS

        PLAYA DEL RAY

        2:00 PM

        AI LA, DELL, NVIDIA

        SANTA MONICA

        10:00 AM

        • Women Founders, Cold Brew & Beach View, Rooftop: See Details

        Clutch Talent

        11:00 AM

        11DollarSunglasses.com, Less Litter Foundation

        12:00 PM

        Data in LA, Amplitude

        12:30 AM

        New Moon, Warner UK Innovations

        TOPANGA CANYON

        3:00 PM

        Dreamore

        VENICE

        8:00 AM

        • Surf session with founders, investors, creators: See Details

        Surfed Club, Bow Shock

        12:00 PM

        • Podcast Panel and Brunch: LA Tech Community Builders: See Details

        WeAreLATech.com, Blankspaces.com

        VIRTUAL

        2:00 PM

        BLCK UNICRN


        For updates or more event information, visit the official Tech Week calendar.

        Enjoy LA Tech Week 2024!


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