Playing together in their first tournament, Erlich, 41, and Matkowski impressed during week one when they eliminated the second seeds.
And the signs looked good as they stormed into a 2-0 lead, romping to victory in the opening set 6-1 before winning the second 7-5 on a tie-break.
Erlich of Israel believes it was "an opportunity missed" as they allowed their opponents to get back into the game on Court 17.
Sharan of Egypt and Sitak of New Zealand bounced back superbly to win three sets on the spin - 6-4, 6-4, 6-4.
"The third set got away from us," a disappointed Erlich told JC Sport. "There are no excuses - they had a little luck and some crazy shots hit the line."
"Maybe our energy dropped," he reflected. "They stayed aggressive, we had our chances but didn't capitalise. Physically we were more tired than them, but I believe we were the better team.
"But at this level you have to see out the match when you are ahead, especially on grass. The bottom line is they didn't give up, so congratulations to them."
