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Could these small cap ASX tech shares be the next Appen?

Just four years ago Appen Ltd (ASX: APX) was a ~$150 million small cap flying under the radar of most investors.

Fast-forward to today and the language technology solutions company is a $3 billion market darling that has generated significant wealth for long-term shareholders.

With that in mind, I thought I would take a look at the small end of the technology sector to see if there are any companies that could follow in its footsteps over the next few years.

Three which I think have significant potential are listed below. Here’s why they could be worth keeping a close eye on:

LiveTiles Ltd (ASX: LVT)

LiveTiles is a digital workplace platform provider which helps businesses boost employee engagement through the creation of internal dashboards, intranet portals, and collaborative online working environments. Strong demand for its offering led to the company reporting a 167% increase in annualised recurring revenues to $40.1 million in FY 2019. Pleasingly, management appears confident that there’s still a lot more growth to come and continues to target annualised recurring revenues of $100 million by the end of June 2021. 

Serko Ltd (ASX: SKO)

Serko is a fast-growing online travel booking and expense management provider. In FY 2019 it continued its strong form and  posted a 28% increase in total operating revenue to NZ$23.4 million. This was driven by strong demand from a combination of new and existing customers. In fact, just over 88% of its revenue is classed as recurring, which I believe gives it a great foundation to build on. In FY 2020 management expects the company to achieve total operating revenue growth of between 20% and 40%.

Straker Translations Ltd (ASX: STG)

Straker Translations is a translation services platform provider which reminds me a lot of Appen. This is because it uses a combination of crowdsourced human intelligence and artificial intelligence to provide its services at scale. It was also a strong performer in FY 2019, reporting a 44% increase in revenue to NZ$24.6 million. I expect more of the same in FY 2020 and beyond thanks to the quality of its services, recent acquisitions, and its significant global market opportunity.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended LIVETILES FPO, Serko Ltd, and Straker Translations. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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