IME it's because you end up spending tons of time on the proposal, with no guarantee of revenue. And then you're in their process, and they'll have their procurement folks hammer you on price. They'll know that after investing all that time in the RFP process, you won't want to give up on the revenue, and they'll take advantage of that.

Big picture: it just frames things the wrong way — if they want to buy from you, then they're buying from YOU. If you get pulled into an RFP, then you're selling to THEM.

That doesn't mean RFPs are always bad, just that they can be terrible for startups that are too small, and not prepared for the process.

Have sold to a lot of governments and large contractors. I wouldn't say its a death sentence, just different business model than most startups. Government and large orgs that send out RFPs are essentially asking for a product/service to be made and maintained specifically for them. Unless your essentially in the consulting business, its rarely worthwhile for a normal startup as it eats A LOT of time for a single customer. Government can be very lucrative if you can find the right niche but its always exceedingly painful and one of the governments favorite pastimes is completely 180ing requirements right after you complete them.

Problem here to not underestimate is that if you are not experienced in RFPs you will spend 10x to 20x the time than someone that has experience int these processes, and then there is a real risk that you optimistically misinterpreted some qualification criteria that disqualifies you in the process. So if you have done this before, do it. If have to do it for the first time, you want to consult someone who has walked the path.