Modu started teasing everyone in January last year, and revealed what it had in store a month after. Crunchgear’s John Biggs dubbed it cool but flawed, but this was all way before the company ever had something to show for its promises and – meanwhile – over $85 million in venture capital funding. Well, now they do.

At the heart of the Modu ecosystem is a small modular mobile phone (the lightest one available according to the Guiness Book of World Records) that comes with complete mobile functionality but also doubles as both a music player and a mass storage device (2 GB). The modu phone boasts a seven-key keypad to perform basic functions even without a jacket, but it’s really the jackets that make the product unique.

Straight from the press release, the freshly unveiled Modu jacket line-up includes:

• Night jacket: inspired by the nightlife scene, this jacket includes futuristic styling with an edgy keypad, flashing lights, night mode imaging and a unique graphical user interface
• Street-art jacket: capturing the expressive and vibrant street art scene, this jacket fea tures stereo speak ers and dedicated music keys for a powerful music experience
• Classic jacket: designed to fit the everyday needs of a modern lifestyle, this jacket carries all essential mobile communication features with an air of elegance and fine taste
• Express jacket: this jacket transforms the modu phone and user interface with a rain bow of fun, playful flavors

Pictures:

More jackets will be announced in the course of this year.

The jury is still out if Modu is onto something here, but it’s refreshing to see a company in the mobile industry risk such a bold move and truly try to innovate the space. I’m curious to find out what else they’ll announce at the Mobile World Congress; they’re promising more news on “global distribution of the Modu phone and jackets, with a significant initial order; partnership agreements; new product news; and manufacturing and production capabilities”.

Modu was founded in 2007 by Dov Moran, the inventor of the USB Flash Drive (he was the founder, Chairman and CEO of M-systems, acquired by SanDisk Corp for $1.6B at the end of 2006), and you can hear him explain the product in the interview embedded below.

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Modu has had a whirlwind of a year, first debuting to much fanfare at last year’s Mobile World Congress, where we had a chance to sit with the company’s CEO, Dov Moran, for a 1-on-1 for a demo. The company then went on to raise a whopping $100M round. Then in November Modu announced a 33%, 88-employee downsizing in November.

Clearly things are not all rosy at Modu, but the company now has some more cash to pursue its very risky mobile play. If anyone has any further info, please post it in the comments below.

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The round hasn’t closed yet, but clearly the details are leaking. The Globes isn’t naming the new investors but says that the company is being valued at $150 million pre-money, meaning they’re giving away a whopping 40% of the equity in this round. They must really need the money to get the product to market to take that kind of dilution.

Founder Dov Moran’s previous company, M-Systems, pioneered the concept of the USB flash drive and sold to SanDisk for $1.6 billion in 2006. See an interview with Moran here.

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We just got out of an interview with Dov Moran, founder of Modu. As we suspected, the device is a module-based GSM system that includes a small, fully-functional phone and a set of “mates” or “jackets.” You can pop the phone in and out of different devices and add GSM functionality to almost anything, from GPS units to cameras. You’ll pay about 200 euro for a phone and two jackets and then a little extra for different devices.

The product will be very interesting to CE manufacturers in that it reduces to the time-to-market considerably and ensures they don’t have to go through FCC testing with every new mobile product. John at CrunchGear has a more detailed take on things but the idea is very compelling.

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Now what’s Moran up to at Modu? The company recently changed its name from InFone Tech, an Israeli startup that raised $20 million in June, 2007 from Gemini Israel Funds and Genesis Partners.

Since Modu is inviting speculation as to what it is all about, here is mine: it looks to me like a mobile device, or possibly a broader platform, based on a removable flash drive that can be swapped from your cell phone to your car to your MP3 player to your laptop. Taking your music with you in a Modu flash drive would be one obvious application, but maybe the startup has grander ambitions than just music. Can you figure out what Modu does from the video below?

Update: I’ve received more information that suggests this is a cell phone/flash drive. That is, it has cellular capabilities and you can store your music, pictures, videos, and contacts on it. Plug it into your car and it becomes your phone and music player on the go. That device you see at the end of the video is the default device that you snap the flash drive/phone into. It has a one-inch screen is supposedly very power-efficient.

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