Growth-oriented investors love the tech sector because it's filled with ambitious companies that want to expand across big addressable markets. Many of those companies will fail, but the ones that succeed can generate massive returns for their early investors.

Let's take a look at three forward-thinking companies that aren't afraid to take big risks to disrupt older markets: Shopify (NYSE:SHOP), Lemonade (NYSE:LMND), and Square (NYSE:SQ).

1. Shopify: The decentralized e-commerce king

Shopify's e-commerce services enable merchants to easily set up online stores, process payments, fulfill orders, and manage their own marketing campaigns.

By empowering merchants to build their own e-commerce platforms, Shopify is disrupting the walled gardens of third-party marketplaces like Amazon and eBay.

A woman takes a photo of a pair of shoes for an online order.

Image source: Getty Images.

Shopify now serves over 1.7 million businesses worldwide, and its decentralized network of sellers represents a long-term threat to traditional online marketplaces and brick-and-mortar retailers.

Shopify's revenue rose 59% in 2018, 47% in 2019, and 86% in 2020 as more businesses shifted online during the pandemic. Wall Street expects its revenue and adjusted earnings to rise 52% and 9%, respectively, this year, as its momentum continues in a post-pandemic world.

Shopify's stock isn't cheap at over 220 times forward earnings and more than 30 times this year's sales. But its early-mover advantage and disruptive growth potential could justify that high valuation.

2. Lemonade: An all-in-one app for online insurance

Lemonade's app helps people sign up for home, renters, life, and pet insurance policies on a single platform. It uses AI services and chatbots to streamline the sign-up process, and it can insure users within 90 seconds and process claims and payments in just three minutes.

Signing up for insurance policies can be frustrating and time-consuming, especially for first-time buyers. That's why 70% of Lemonade's users are under the age of 35. It recently announced its plans to enter the auto insurance market, and it could provide travel and health insurance plans in the future.

A woman looks at a virtual piggy bank on her mobile phone.

Image source: Getty Images.

Lemonade's revenue rose more than 11-fold in 2018, nearly tripled in 2019, and grew another 40% in 2020. Its gross loss ratio continually declined over those three years, and its gross margins expanded as it relied more on AI tools and chatbots to cut costs.

It expects its gross earned premium, which it calls a better indicator of its growth than its revenue (which is affected by a change to its reinsurance structure in 2020), to grow 70%-73% this year.

Lemonade isn't profitable yet, and its stock is also pricey at over 40 times this year's sales. Nonetheless, investors who love great growth stories shouldn't ignore its disruptive potential.

3. Square: A forward-thinking fintech company

Square initially disrupted the point of sale (POS) system market with its streamlined payment apps and stand-alone registers. It then expanded its merchant-oriented ecosystem with analytics, marketing, payroll, and financing tools.

For consumers, Square offered peer-to-peer payments, Bitcoin (CRYPTO:BTC) purchases, and free stock trades on its Cash App. It also linked those Cash accounts to physical debit cards.

Square's revenue rose 49% in 2018, 43% in 2019, and 101% in 2020 as it offset its sluggish growth in seller services revenue with high sales of Bitcoin on its Cash App -- which ended the year with 36 million monthly active customers. It also processed $112.3 billion in gross payment volume (GPV) for the full year, representing 6% growth from 2019.

Square's dependence on lower-margin Bitcoin revenue throughout the pandemic squeezed its margins, but that pressure should ease as its merchant-facing businesses recover after the pandemic ends.

That's why analysts expect Square's revenue and adjusted earnings to rise 52% and 48%, respectively, this year. Its stock initially looks expensive at 120 times forward earnings, but it also trades at just seven times this year's sales -- which makes it cheaper than many other high-growth tech stocks.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.