Oct 10 (Reuters) - Venture capital investors in the

United States remained cautious about dealmaking amid economic

uncertainty, according to a PitchBook-NVCA report released on

Thursday, underscoring challenges in the industry despite a

rally in public markets.

About $37.5 billion of deals were clinched in the third

quarter ended Sept. 30, nearly 32% lower than the preceding

quarter, the report said.

Limited liquidity has driven investors to negotiate tougher

terms for startups, leading many to postpone funding until

conditions improve.

The report highlights the challenges in the VC space, at a

time when the spotlight has been on the massive rounds for

artificial intelligence companies.

"AI companies are commanding the most attention in venture,"

the report said.

Despite the slowdown in dealmaking, interest rate cuts by

the Federal Reserve may stimulate activity.

"Though 50 basis points won't be enough to jumpstart

venture, it is a step in the right direction," said Emily Zheng,

VC analyst at PitchBook.

A revival of the IPO market could further accelerate VC

deals by providing investors with more opportunities to exit

their investments.

PRIVATE FOR LONGER

Leading startups like Stripe, OpenAI and SpaceX are choosing

to stay private for longer, offering employees liquidity by

doing secondary share sales instead of tapping the public

markets.

"Secondaries are the best of both worlds. Companies can stay

private for longer and investors that want liquidity can get

it," Zheng said.

The rising appeal of private assets may also be encouraging

some to delay their IPOs, especially if they secure ample funds

from private market investors.

"The democratization is going to come. The private market

will continue to open and this new asset class is here to stay,"

said Howe Ng, head of analytics and investment solutions at

private marketplace Forge Global ( FRGE ).