It wasn't that long ago that market darlings Altium Limited (ASX: ALU) and Afterpay Touch Group Ltd (ASX: APT) were classed as small cap shares and flying under the radar of most investors.
Today they are multi-billion-dollar tech companies and have provided incredible returns for their early investors.
Whilst not all tech companies will be as successful as these two and many will struggle to fulfil their potential, I believe there are a few small cap tech shares that have the potential to grow into much larger companies in the future.
Two that I think investors should watch closely are as follows:
LiveTiles Ltd (ASX: LVT)
This digital workplace platform provider has caught my eye over the last 18 months after achieving stellar annualised recurring revenue (ARR) growth. Pleasingly, management remains confident that this strong growth can continue and aims to hit at least $100 million in ARR by the end of June 2021. This compares to its ARR of $22.9 million at the end of the first half of FY 2019, which was a 232% increase on the prior corresponding period. Whilst this is a lofty target, I believe it has a good chance of achieving it thanks to the engagement of a specialist sales force, ongoing high-impact campaigns, and joint-marketing initiatives with global tech giant Microsoft.
Splitit Ltd (ASX: SPT)
The Splitit share price has been on fire since listing on the ASX in January due to investors believing that it could be the next Afterpay. However, I would liken it more to Zip Co Ltd (ASX: Z1P) than Afterpay based on its current product offering. Splitit provides a cross-border credit card-based instalment solution which allows consumers to pay for a product using their existing credit cards but divide the total purchase cost across as many as 36 interest-free monthly payments. I think it has a lot of promise, but I would suggest investors hold off an investment for now and wait to see how it fares over the next 12 to 18 months.
