Pretty much everyone on the .NET ecosystem moved to the so-called SDK-style projects. Amazingly, even today (as of now, VS 2022 17.7 Preview 2.0) the out of the box template for VSIX projects still uses the legacy (and awfully verbose) format.

So, forget the built-in VSIX template and just create a plain class library, and tweak it as follows:

<Project Sdk="Microsoft.NET.Sdk">

    <!-- If you don't have a VS Package -->
    <!-- Import build tools -->
    <CustomAfterMicrosoftCSharpTargets Condition="$(VsSDKInstall) != ''">$(VsSDKInstall)\Microsoft.VsSDK.targets</CustomAfterMicrosoftCSharpTargets>

    <!-- Enables F5 -->
    <StartArguments>/rootSuffix Exp /log</StartArguments>

    <!-- Minimal references that should allow pretty much everything -->
    <PackageReference Include="Microsoft.VisualStudio.SDK" Version="17.6.36389" />
    <PackageReference Include="Microsoft.VSSDK.BuildTools" Version="17.6.2164" PrivateAssets="all" />

  <!-- Allows vsixmanifest to retrieve dynamically-determined version, just like nuget packages -->
  <Target Name="GetVersion" Returns="$(Version)" />


An equally minimalistic VSIX manifest would be:

<?xml version="1.0" encoding="utf-8"?>
<PackageManifest Version="2.0.0" 
    <!-- You can use the |ProjectName;TargetName| syntax throughout this manifest, BTW -->
    <Identity Id="Vsix" Version="|Vsix;GetVersion|" Language="en-US" Publisher="kzu" />
    <DisplayName>SDK-Style VSIX</DisplayName>
    <Description>A minimal VSIX that uses SDK-style project</Description>
    <InstallationTarget Id="Microsoft.VisualStudio.Community" Version="[17.0,)">
    <Prerequisite Id="Microsoft.VisualStudio.Component.CoreEditor" Version="[17.0,)" DisplayName="Visual Studio core editor" />

Now you can F5 or Ctrl+F5 and have “fun” extending VS 😉.