Most of the industry won't survive the transition. The technology civilization needs is what comes next.

Software has become a commodity. The cost of building it has collapsed. A solo founder with the right tools can now reach real revenue without raising a dollar, and increasingly without diluting at all. Many of them won't.
This is the part most analyses stop at. The interesting part is what it does to the industry on the other side.
Where the deals went
When the cost of building drops below the threshold where founders need outside capital to start, the pool of investable software companies starts to evaporate from the bottom. The deals that used to fill the early-stage funnel, smart team, a few hundred thousand to build the first version, eighteen-month runway to find product-market fit, are mostly not happening anymore. They're being replaced by builders who simply ship.
What's left in the software category for a venture fund is one of two things. Either projects too risky to attempt alone, which means founders who can't execute solo, which is rarely a good investment signal. Or projects that have already scaled, where the capital comes in late, at valuations that compress the upside. Both are worse than what the asset class used to offer. The middle of the funnel, which is where venture capital made most of its money for thirty years, is hollowing out.
Fishing deeper
The natural response is to fish deeper. If the surface of the pond no longer has fish, you go where the fish actually are. That means deep tech. Foundation models. Fusion. Biotech platforms. Robotics. Semiconductor design. Materials science. These are the categories where capital is still genuinely the limiting factor, where the timelines justify long-duration money, where one good bet can return a fund.
But fishing deeper requires equipment most funds don't have.
The wrong toolkit
You don't evaluate a fusion startup with four associates and a financial pattern-matching framework. You evaluate it with people who have actually built things in adjacent fields. You don't underwrite a foundation model lab with diligence from an MBA. You underwrite it with someone who has trained models, or built infrastructure, or shipped systems at the scale being attempted. The skill that wins in deep tech is operator-level technical judgment, deployed inside the fund. Most funds have spent the last twenty years optimizing for exactly the opposite, lean teams of generalist analysts whose value was pattern matching across a lot of similar SaaS deals quickly.
Those analysts aren't useless. They're just useless for the deals that remain.

The compression
What this produces, over the next several years, is a compression. The number of competitive funds shrinks. Not because the demand for risk capital goes away, but because the form of capital required has changed in ways the average fund can't replicate. Generalist software funds get squeezed from both sides at once. Their best deals don't need them. Their remaining deals require expertise they don't have. The economics stop working.
Many funds will close. New ones will open, founded by people who structure them correctly from the start, operator-led, technically deep, with longer time horizons and smaller teams. The industry that emerges on the other side will be smaller, more specialized, and more useful than the one we have now.
The cleanup is good
This is the part that doesn't get said.
For the last decade, software has absorbed the majority of venture capital, partly because it was the easiest place to deploy money fast and get legible returns. That capital was being drawn away from sectors that needed it more. Energy. Biotech. Hardware. Atoms-based businesses with long timelines and real technical risk. These sectors have been quietly starving for patient capital, while the venture industry chased SaaS multiples that were always going to compress.
If software stops being the easy default for venture money, that money has to go somewhere. The somewhere it goes, deep tech, frontier infrastructure, hard physical problems, is exactly the somewhere we need it. The reallocation isn't a loss for the technology ecosystem. It's an acceleration of the categories that have been waiting for serious capital for a long time.
The funds that survive will be the ones that figured out how to be useful again. The founders that take their money will be the ones for whom money is actually the bottleneck, not just an option among many. Both are healthier arrangements than what we had.