There's a template tag for this, if all you care about is its presentation on the page. First, define an organizational principle in the class. In your case, it's the first letter:
class Item(models.Model):
...
def first_letter(self):
return self.name and self.name[0] or ''
And then define a regroup in the template, using the first_letter call:
{% regroup items by first_letter as letter_list %}
<ul>
{% for letter in letter_list %}
<li>{{ letter.grouper }}
<ul>
{% for item in letter.list %}
<li>{{ item.name }}</li>
{% endfor %}
</ul>
</li>
{% endfor %}
</ul>
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