With the upcoming Facebook initial public offering (IPO) dominating the news, the technology sector has been especially attractive to investors lately. As all the talk about hot technology IPOs over the past several months has become almost reminiscent of last decade’s dotcom bubble, it’s time to review the facets of a successful technology investment.

Technology stocks are notoriously difficult to evaluate because they rarely abide by the usual fundamental metrics. For instance, price-to-earnings (PE) ratios in the sector aren’t particularly useful because they tend to run extremely high relative to other industries.

The price-to-earnings growth (PEG) ratio—calculated as the stock’s PE ratio divided by projected earnings growth—is often a more useful data point when analyzing a tech stock. If the stock’s PEG ratio is less than 1, it probably has some upside, while a stock with a PEG ratio greater than 1 is already pricing in anticipated growth. Although the PEG ratio isn’t foolproof since it requires a fairly accurate estimate of future growth, it’s at least a good starting point.

And, of course, the technology itself is paramount. In the case of Facebook, for example, there’s little preventing users from switching services other than the network effect. Essentially, Facebook is valuable because it boasts so many users. Indeed, there’s no shortage of websites that offer similar interfaces, but have fewer users. As such, Facebook would be a riskier bet than a company such as Microsoft Corp (NSDQ: MSFT), whose operating system has become a core component of so many applications.

It’s also important to assess the quality of a company’s management when analyzing a technology stock. Bill Gates and Mark Zuckerberg are both college dropouts who founded two of the most successful companies in the world. But in most cases, it’s probably best to avoid betting on a 20 year-old with no real-world experience. Instead, companies should have a solid track record and a demonstrated ability to grow and endure over at least a full business cycle.

Financing is another major consideration, particularly when you’re looking at a younger firm. It doesn’t matter how compelling a new idea or technology may be, a company will fail if it doesn’t have access to the cash necessary to bring its wares to market. While established companies like Cisco Systems (NSDQ: CSCO) have ready access to capital in addition to a cash hoard on their balance sheet, a firm fresh off its IPO may be burning through cash too quickly. Ideally, you’ll want to invest in a company that has enough cash on its balance sheet to finance its operations for at least two years, especially if it has yet to become profitable.

Finally, intellectual property (IP) is what ultimately gives a tech firm its competitive edge. A technology company with a broad patent portfolio is going to be inherently more valuable than one with a slim IP portfolio. It’s harder to compete with a company that holds 500 patents versus one that holds just five. That’s a key reason the Facebook IPO has been so anticipated; the company holds patents on many of the technologies underpinning the social networking interface, which creates yet another hurdle for its competitors. Investors can learn more about a company’s IP portfolio in its prospectus.