We propose and experimentally demonstrate a novel compact folded Michelson interferometer (FMI) modulator with high modulation efficiency. By folding the 0.5 mm-long phase shift arms, the length of the modulation area of the FMI modulator is only 0.25 mm. Meanwhile, the traveling wave electrode (TWE) is also shorter, which decreases the propagation loss of the RF signal and contributes to a small footprint. The Vπ-L of the present device is as low as 0.87 V·cm at -8 V bias voltage. The minimum optical insertion loss is 3.7 dB, and the static extinction ratio (ER) is over 25 dB. The measured 3-dB electro-optical (EO) bandwidth is 17.3 GHz at a -6 V bias. The OOK eye diagram up to 40 Gb/s is demonstrated under 2 V driver voltage.