Extracting oil from spent coffee grounds (SCG) for biodiesel production has recently attracted much research interest. Large amounts of organic solvents are involved for oil extraction and biodiesel synthesis. Hydrothermal liquefaction (HTL) is an emerging thermochemical technology with great potential for biocrude production from a broad range of feedstocks. This study attempted to compare two SCG valorization options: route 1, oil extraction for biodiesel production followed by HTL of defatted SCG; and route 2, direct HTL of raw SCG. The microwave-assisted extraction conditions were optimized to effectively remove oil from SCG using response surface methodology. Under optimal conditions, an SCG oil yield of 8.4 wt.% could be achieved. HTL of defatted SCG generated less biocrude (18.9 wt.%) than that of raw SCG (28.1 wt.%). The biochemical compositions of resultant biocrudes were largely different from each other. The life cycle assessment was conducted on each of the SCG valorization routes and showed that the greenhouse gas emissions from direct HTL of raw SCG were only 35% of the other valorization route, suggesting that direct HTL is a favorable valorization route for SCG within this study’s scope.