Popular tech shares Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) were the talk of the market last month after they delivered results that smashed expectations once again.
The recent buying frenzy has driven their shares notably higher and means that they now have market capitalisations of approximately $4.3 billion and $2.6 billion, respectively.
But they weren't always multi-billion-dollar companies. In fact, in 2015 Appen had a market capitalisation of ~$150 million and a year earlier Altium was valued at approximately $275 million.
Clearly, early shareholders have done very well by being patient and holding onto their shares with a long-term view.
With that in mind, here are three small cap tech shares that I think investors ought to keep a close eye on over the next four to five years.
ELMO Software Ltd (ASX: ELO)
ELMO is cloud-based human resources and payroll software provider offering customers a unified platform to streamline processes for employee administration, recruitment, onboarding, learning, performance, remuneration, compliance training and payroll. Whilst its recent first half result was a touch disappointing, it appears well-positioned for long term growth thanks to its very large market opportunity in the ANZ region and quality product.
LiveTiles Ltd (ASX: LVT)
LiveTiles is a digital workplace platform provider which I feel could be well worth keeping a close eye on in the coming years. In the first half of FY 2019 the company recorded a 232% increase in annualised recurring revenue (ARR) to $22.9 million. Management now has its sights on growing its ARR to at least $100 million by the end of June 2021.
Megaport Ltd (ASX: MP1)
Megaport is a provider of elastic interconnection services across data centres globally. Its increasingly popular service allows its users to increase and decrease their available bandwidth in response to their own demand requirements. This means that its users don't need to be tied to fixed service levels on long-term and expensive contracts and can just use what they need when they need it. In the first half of FY 2019 the company posted a 70% lift in monthly recurring revenue (MRR). With the cloud computing boom gathering pace, I expect demand to increase strongly over the next decade.
