GlaxoSmithKline is no stranger to venture investing, having backed SR One, one of the earliest corporate venture firms. Now instead of investing as a limited partner, it will collaborate with Avalon Ventures to fund and launch up to ten early-stage life sciences companies in San Diego.

It’s not a totally novel idea, but one that is gaining traction as Big Pharma looks externally to earlier stage innovation to fill an R&D pipeline. In the past couple of years Celgene teamed up with Versant Ventures to fund and launch Quanticel and Sanofi joined with Third Rock for the launch of Warp Drive Bio.

What’s different this time is the scale of the collaboration. Avalon will identify promising technologies focusing on early-stage discovery across various therapy areas. Avalon and GSK will then jointly approve the formation of new companies based on these technologies, which they will then finance together. Avalon is committing up to $30 million from its newly raised venture fund while GSK has said it will provide up to $465 million in company seed funding, research and development support and success-based preclinical and clinical milestones for up to ten companies.

As it has with its other portfolio companies, Avalon will actively manage the companies to get them going. GSK has the option to acquire each company after a clinical candidate is generated. If it doesn’t exercise the option, Avalon will retain company ownership and be free to enter into other strategic transactions.

“We are committed to finding creative ways to support academia and the early stage research that is vital to the success of our industry,” says Moncef Slaoui, GSK chairman of R&D.

Avalon favors an asset-centric venture model, which involves forming a company around an asset or technology that can be developed quickly and efficiently so that it can be partnered or sold to Big Pharma. Venture involvement in the management team is a must. Jay Lichter, Avalon’s managing director and director of life science investing says the idea is to invest just enough in an early stage company—on the order of less than $15 million—to make enough progress to license or sell the technology. “You can take that and you can look for that average exit, which is somewhere on the order of $130 million to $150 million, and you will be investment heroes and will have advanced the science,” he says.

As an example, the January licensing agreement between Avalon portfolio company Afraxis and Genentech in which it agreed to pay up to $187.5 million in upfront, research, and milestones for an exclusive license to Afraxis’ technology. The licensing agreement was essentially the same as selling the company as Genentech took control of all of its intellectual property.

While the technologies may come from anywhere, the companies that are created from this collaboration will all be located in San Diego.