Two of the biggest IPOs in digital health lately have come out of the wearable and telehealth spaces. But those aren't the spaces at least two seasoned digital health investors are most excited about. At BIO 2016 in San Francisco last week, Casper de Clerq, a general partner at Norwest Venture Partners, and Dr. Lucian Iancovici, a general partner at dRx Capital, Qualcomm and Novartis' joint investment company, spoke about how digital health looks to them these days.

"Where we direct our healthcare investing is really around clinically regulated areas," de Clerq said. "... I’d say we universally look for outcomes data. While reimbursement models of value-based care are what everyone talks about, it’s still 20 percent of all the dollars spent. We know it’s going to move to 50 percent. We really depend on clinical outcomes because the company’s always fundable if it has good outcomes."

Both Iancovici and de Clerq have benefitted from various recent wearable exits: Iancovici was invested in Fitbit via Qualcomm Ventures and de Clerq invested in both Misfit and Basis before they were acquired. De Clerq said he's learned to look for wearable companies that push the envelope in multiple ways.

"We invested early on in Misfit and Basis, the early wearable companies," he said. "What we learned from that is just how much you have to be consumer-oriented. We have to think about patients as consumers constantly. So we think about ... how do they make devices that take advantage of computing power, efficient batteries, and ultimately data analytics and algorithms to really make a difference in terms of outcomes?"

On the other hand, with some prodding from the panel's moderator Wainwright Fishburne, a partner at Cooley, both investors admitted that they by and large steered clear of the telehealth space.

"We spent a lot of time avoiding, not really believing in the space," Iancovici said. "There’s four or five companies that are so far ahead and have raised enough money it’s hard for anyone to catch up."

Of those companies -- Teladoc, American Well, MDLive, and Doctor on Demand -- only Doctor on Demand has Iancovici's investment. And that decision was based partly on a direct-to-consumer business model the company has now pivoted away from.

"What we thought atbout the space was the traditional player, Teledoc, is a 90 percent phone call system," he said. "It’s not using modern technology. We thought Doctor on Demand, which was initially a consumer product that had consumer DNA, was a much better product. It was almost 100 percent video and had a more modern technology infrastructure, so it could be cheaper and could win that race to the bottom."

What had the two investors excited was the shift to value-based care, and companies that enable that shift in various ways. Two of dRx Capital's recent investments, Omada Health and Cala Health, are digital therapeutics -- online or mobile programs that actually treat a condition, sometimes in lieu of a drug. Value-based care will help digital therapeutics to gain traction even when they might get hung up on reimbursement under fee-for-service. De Clerq agreed, citing some other companies, in the diabetes space, as an example.

"Technically for [diabetes] a drug to be approved you have to show a half-point drop in HbA1C," he said. "Telcare, WellDoc have shown you can regularly see a 1 to 2 percent drop. It’s more time intensive, it’s more work intensive, but you know what? That should be worth at least $300 per month to a healthcare system that’s based on value-based care."

The two also spoke about companies that tackle various inefficiencies in healthcare and just steamline them with software. Science 37, a recent dRx investment, aims to do that with clinical trials. Health Catalyst, a Norwest investment, aims to pull together data from different hospital systems to insure doctors have complete information on their patients. AnalyticsMD, another recent investment of DeClerq's, helps hospitals manage the flow of patients in their ER.

"We’ll invest behind the trends, trying to predict where things are going," de Clerq said. "But there’s some things that are really obvious. There’s value-based care coming. We’ll see consolidation at insurance companies, and then in reaction to that consolidation of providers. ... You fundamentally have to be doing better outcomes for lower costs."