A pencil holder is basically a cup with a sturdy base that can be used to hold objects taller than itself, such as pens, pencils, and other items that might otherwise clutter up a desk. A cute, cartoony octopus's tentacles will provide the perfect base and prevent the cup from tipping over.
The hole in the cup should be roughly cylindrical, about 40-50 mm wide at the base. The whole thing should stand at least 80 mm tall. And, of course, it needs a cute and friendly face, something like this: