Rise Companies Corp.

Bloomberg News

Real estate crowdfunding platform Fundrise , the most well-financed of a new crop of startups pooling investors to back real estate projects, has added another $3.6 million to its Series A funding round. taking total funding to $38 million.

New investors in the Series A round, which remains open, include Guggenheim Partners, Rockrose President Justin Elghanayan and James Ratner, the chairman and chief executive of Forest City Commercial Group.

Its lead investor is the Chinese social networking company Renren Inc. whose chairman and CEO, Joseph Chen, is on Fundrise’s board.

Fundrise continues to look for high-caliber institutional investors who can help the business, according to co-founder and President Daniel Miller.

“We overcapitalized ourselves, not just for technology, but we need a balance sheet to be credible to real estate companies and investors,” Mr. Miller said. “We want to be around for the long haul.”

Other real estate crowdfunding companies include Realty Mogul, which has raised $10 million, AssetAvenue and RealtyShares, which have raised $3 million, RealCrowd, which has raised $1.6 million, and CrowdStreet, which has raised $800,000.

Fundrise, whose corporate name is Rise Companies Corp. was founded in 2010 in Washington by Mr. Miller and his brother, Benjamin Miller. Their father is a real estate developer, Mr. Miller said, and they wanted to allow D.C. residents in emerging neighborhoods to be able to participate in funding local real estate projects.

This was before the JOBS Act, which became law in 2012, and federal regulations on crowdfunding, which the Securities and Exchange Commission has still not approved. The brothers went from attorney to attorney to find a way to let local investors, even if they weren’t considered accredited by the SEC, to invest as little as $100 in local projects, Mr. Miller said.

For their first project, they raised $375,000 from 175 investors—that took two years and $800,000 in legal fees.

Meanwhile, real estate companies were contacting Fundrise to ask if they could use the company’s software. So, 18 months ago the brothers broadened their business to allow more conventional real estate crowdfunding, where accredited investors invest in projects submitted by commercial developers.

The Millers still love the idea of letting local investors invest small amounts of money in local projects, Mr. Miller said, but until the SEC approves the crowdfunding regulations, “it’s not an economical idea and it will take awhile.”

Over time, however, he sees a big and exciting business in opening local commercial real estate projects to local investors. He believes that once the crowdfunding regulations are approved, they will disrupt the real estate industry in the same way that the Internet has disrupted the media business.

For Fundrise’s first local project, for instance, which was for a building leased to a famous local chef, about 30 of the investors contacted their city council member to ask about expediting the approval of permits. That was done—the process was cut from four months to two weeks, he said.

“Distributed tech networks of investment that will be efficient, on-demand, instantaneous and decentralized will pop up and start to grow, and they will challenge the centralized and Wall Street-dominated [investment landscape of today],” Mr. Miller said.

Another real estate crowdfunding company, Groundfloor Inc. which has raised $1 million in seed funding, also works with local non-accredited investors but at a state level. In August, the company moved its headquarters from North Carolina to Georgia because Georgia permits any state resident to invest in Georgia projects, even if the investors are not accredited.

Several other states now allow or are about to allow the same practice, Mr. Miller said.

Other new investors in Fundrise include Debbie Ratner Salzberg of Forest City, Terrence Rohan of Index Ventures, Onyx Equities co-founder Jon Schultz, Michael Gerwiz of Potomac Investment Properties, Artemis Real Estate Partners CEO Debbie Harmon, and Haniel Lynn of Corporate Executive Board.