If those options are ISOs, then their exercise price is almost certainly going to be equal to the 409A valuation, which means they're worth $0 upfront[1] and gain value as the company grows more valuable. Since you only make money if the company's value goes up, it's almost impossible to accurately assign a value to it.
[1] I use "worth" loosely here. More accurately they have intrinsic value of $0 upfront (maybe a bit more because the company has grown since the last 409A), and some hard-to-determine time value. see: https://en.wikipedia.org/wiki/Option_(finance)#Basic_decompo...
I don't think this is generally the case; typically the 409A valuation is using accounting rules that are different from how you would personally judge the value of the stock, and the founders are trying to minimize the 409A valuation, so typically 409A valuations are much lower than people would buy the stock from you if there were a market for it. But you have to make your own judgment of how much you think the stock is worth.
But essentially, my point is that even with quite optimistic assumptions, the OP is not getting a good deal, and I think we clearly agree on that, it's just a question of "how bad" a deal the OP is getting.
No its a harmfully naive analysis, your "calculations" put the common shares at 10x their stated FMV.
I'd run. If the numbers there are correct, neither management nor investors really have any confidence in the company. As an employee you shouldn't either, particularly for that far under market in cash comp, and if somebody is willing to double your cash compensation, take it.
That is not the valuation of the company, not all shares outstanding are common, some are preferred which are going to have a substantially higher FMV for an early stage.
I don't know what a "normal" multiple/mark-up preferred would normally have at this stage, obviously it varies on terms. 55M shares outstanding this early would not be the sign of a "healthy" cap table unless they didn't start with the standard 10M outstanding.
The parent comment is also correct. We've experienced a down round due to the pandemic.
which is expressed in the preferred share's being valued at 13x the common shares
So, even in the optimistic case, your option package isn't that great. Your company is offering a pretty low cash comp, and unsurprisingly, they're also offering a low option comp. A good company would offer more to someone even with zero years of experience (assuming you're a software engineer). And this is an optimistic evaluation where you really believe in the startup. Your comp is low, ask for a bigger raise or just switch jobs unless you really like it there.