Evolution and Renaissance (1996 - Present)
The death of Toaplan would ultimately open more doors than it would close. Four companies would form from the ashes of Toaplan, and all remained even more devoted to the shooter genre. The first of these new companies was Raizing. Raizing went as far as to continue to use Toaplan arcade hardware for their titles into the late 90s. Their first game was Mahou Daisakusen, the first title in their flagship trilogy.
The following year another company formed from ex-Toaplan staff. Cave premiered with the infamous Donpachi, a game which expanded on the design of Toaplan's final game Batsugun. Batsugun is considered by many to be the starting point for a new breed of shoot 'em up. These games would come to be called "danmaku" (lit. "bullet curtain") in Japan, and "manic" or "bullet hell" shooters in the West. These games are distinguished by high bullet counts, and a small collision zone (or "hit box") for the player which would allow for very tight movements while avoiding a dizzying barrage of enemy fire.
Cave and Raizing would have something of a sibling rivalry. In 1996, Raizing released Battle Garegga, a homage to Taito's classic Gun Frontier. It pushed the manic style a level further, which in turn inspired Cave to put aside their reservations and produce the most manic shoot 'em up yet, Dodonpachi. Cave continued to carry the Toaplan torch, embedding the message "Toaplan Forever" in the high score tables. Their next game, Dangun Feveron, would be a pastiche to Toaplan as well, made to celebrate the tenth anniversary of Truxton.
While their popularity was in decline, this was a creatively fertile time for the genre. In 1998 Treasure released their first arcade shoot 'em up, Radiant Silvergun which has gone down in infamy as one of the best shoot 'em ups ever created. Also, despite the decline of shmup influence in the public sphere, the increased use of the internet led to a new wave of "homebrew" shumps that are free to download and has helped to keep the genre alive if a bit underground. There are several examples of such games like Fraxy, Warning Forever, Genetos, Storm Assault, and Techno-Sylph.
There was also a wealth of websites and forums created to remind others about shumps and to help bring new members into the genre, this wiki being one such site. Shmups! and their forum is a prime example of a shoot 'em up related site.