Indonesian ride-hailing firm Go-Jek needs more funds in market fight-CEO

By Eveline Danubrata

JAKARTA (Reuters) - Indonesian online ride-hailing service Go-Jek is in talks with potential investors to raise fresh funds to expand the business, as the heavy subsidies it gives to drivers to keep rates competitive are unsustainable in the long run, its chief executive said on Friday.

Go-Jek, a play on the local word for motorbike taxis, has become popular among commuters on the traffic-clogged streets of Jakarta as its phone app removes much of the hassle of finding a driver and negotiating fares.

Go-Jek, which has a network of more than 200,000 motorbike taxi drivers, is battling aggressively with other ride-hailing apps such as Grab and Uber [UBER.UL], driving rates lower to gain market share in the country of 250 million people.

But Go-Jek cannot afford to continue relying on subsidies as "you end up where you run out of money", Go-Jek founder Nadiem Makarim told Reuters on the sidelines of an e-commerce industry conference in Jakarta.

Raising funds from investors to expand the business is part of the solution, the Harvard Business School graduate said, adding that several venture capital and private equity firms have expressed an interest in Go-Jek because of its size and potential.

Founded in 2010, Go-Jek has since increased its services to food deliveries, cleaning and even massages. The company, which already operates in big Indonesian cities like Bandung and Surabaya, also plans to broaden its reach and add more drivers.

Its ambition, however, has been met with regulatory obstacles and strong resistance from established taxi operators such as PT Blue Bird Tbk and PT Express Transindo Utama Tbk.

Taxi drivers' protests turned violent in the Indonesian capital last month, when they called for ride-hailing apps to be banned. Government ministers had also said the tech firms should be subject to the same regulatory and tax requirements as conventional public transportation companies.

Yet Go-Jek's Makarim told a packed conference that regulations and demonstrations were not his "biggest headaches".

"For me, the number-one challenge is building something to scale," he said. "It's the technology part that I think is the hardest, it's what keeps me up at night."

(Editing by Greg Mahlich)