As he explains this mechanism allows mitigates the misalignment in purpose which is intrinsic to an unpriced round.   An entrepreneur takes an investors money and uses it to build as valuable as possible a property for the next round of financing, thereby diluting the ownership percentage for that investor.   The “price cap” sets up an explicit minimum percentage that the investment will translate to, and so does a better job of protecting the investor than  the traditional warrants or discounts.

Convertibles with a Price Cap